Construction Financing - Fixed Interest Period

Great, thank you very much for your answers and great zodiac sign ;)

Important: never take risks just for a few thousand euros in interest savings. Also, don't forget inflation.

But as said: calculate (or have it calculated) everything and then weigh risks carefully

The two sentences are crucial!
It’s best not to think about the interest rates, but the calculated contract costs. How high is the remaining debt after the fixed interest period, and how much does a longer term cost me.
With interest rates, people then like to assume 0.8 instead of 1% for half the fixed interest period because it sounds better. But in the background, there may be additional costs of 5000€ and a remaining debt of 200k compared to 100k.

Matter of belief. I don’t think interest rates will rise again. Whether you do well with the Sparda product including the building savings contract... rather not

just go to a broker

I see it the same way...

so such combos (10/15 years bank, then 10/15 years building society) are usually worthwhile for the one offering it to you (commissions!)

I also believe that in the next few years (maybe even decades) we will not see big jumps upwards in interest rates (more like Japan, which has followed a 0% interest rate policy since 1980)
WHY? States have massively increased their debt even more in the last 12 months (Corona...) revenues have decreased, and if interest rates are only adjusted slightly upwards now, states will have to take out even more loans... so rather 0% interest rate policy, and try to drive inflation upwards (3-4%) thus states slowly reduce their debt... without much effort...

if interest rates rise by a few percent, then Italy, Spain, Portugal etc. would have much bigger problems than we had with Greece back then, and if that was already an “earthquake,” then anyone can imagine what will happen if a country that accounts for not 2% of the EU’s GDP (but rather 5-7-9%) – what will happen here in the EU then? (then there will be no more EURO either... and then we will have problems other than bank debt...)

therefore:
10 years fixed interest with good repayment (4% I find good, if you can make special repayments in between, wonderful)
but even if you only manage 2.5-3% repayment during that time:
if you notice that interest rates are going up, you can do a follow-up financing, and you can arrange that a few years in advance!

The two sentences are crucial! It's best not to think about the interest rates, but rather the calculated contract costs. How high is the remaining debt after the fixed interest period, and how much does a longer term cost me. With interest rates, people like to take 0.8 instead of 1% for half the fixed interest period because it sounds better. In the background, however, there may be additional costs of 5,000€ and a remaining debt of 200k compared to 100k.

As mentioned, it depends on the interest difference. For us it was about 1.43% for 15 years versus 0.96% for 10 years. We took the 10 years because it results in several tens of thousands of euros in interest savings.

As I said, it depends on the interest rate difference. For us, it was about 1.43% for 15 years versus 0.96% for 10 years. We took the 10 years because there were several tens of thousands of euros in interest savings there.

Well, no hard feelings, but with a 500k loan and 1600€ repayment (just an example), the difference after 10 years is about 13k€ and not "tens of thousands". And that is not a very large amount in relation to the overall project, since after 10 years you need follow-up financing – which then has to be correspondingly cheap so that as much as possible of the 13k€ remains with you. It's not that simple...

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No hard feelings, but with a 500k loan and 1600€ repayment (just an example), after 10 years of term there is about a 13k€ difference and not "tens of thousands". And that is relatively not a very large amount compared to the project overall, since after 10 years you will need a follow-up financing - which then has to be correspondingly cheap, so that as much as possible of the 13k€ remains with you. It's not that simple ...

I calculated over 21k €. At 0.96% you pay about 41k € in interest in 10 years. 1.43% is 50% more (simple calculation). That means over 20k€ more = several tens of thousands 8-)