Construction financing / fixed nominal interest rate / commitment interest

Why secure only for 15 years? The surcharge from 10 to 15 years is so high that it is not worth it at all. Calculate how much the interest rate would have to rise to break even or actually have an advantage compared to the 10-year fixed interest rate. Better go straight to 20 years (at least with part of the loan). Here, there is sometimes no surcharge or only a 0.1% increase compared to 15 years. Then you have long-term interest rate security with the large loan. And if interest rates fall, every loan can be terminated after 10 years. Then you can still negotiate.

For me, it would be too risky to have to refinance such a huge amount in 10 years.

What should I do regarding Variant 2?

So the plan of the broker is that the building savings contract takes over in 15 years. What would a 20-year fixed interest rate achieve here?

Regarding the interest rate risk after 10 years, the broker writes the following:

I have calculated the 15 years and come to the conclusion that this is not the best solution for you.

The interest rate is 3.21% and the monthly rate is €1,579.

"Let's assume you take the above rate for a 10-year fixed rate and increase the repayment in the building savings contract from 1.8% to 2.25%.
Then you have the rate of €1,565 as above, but instead of saving €90,720 in the next 15 years, you will have saved €113,400.
These €23,000 would have flowed out as interest in the 15-year variant. In the 10-year variant, this amount is additionally available to you as repayment.

The small risk in years 11 to 15 cannot be reduced, except if you manage one or two special repayments. Then it automatically gets smaller.
You also always have the option to split the building savings contract and thus achieve a good mixed interest rate.

Additionally, your wife has the opportunity to earn some extra income in the mentioned 5 years.

If it should get tighter in the 5 years, the rate for the building savings contract can be reduced from €630 to €336.
This offsets your calculated additional burden of €300.

You can also still bring in your Riester contracts, which you are currently saving up, as a special repayment into the financing after 10 years and thus reduce your personal burden.

So there are many flexibilities built in for you."

What do you think about that?
How does he come up with only €300 additional burden? I calculate alone €1,000 more interest per month with the high remaining debt of the pre-loan if the interest rate is, for example, 6%. The KfW would presumably also be higher accordingly.
Then I would have, even if “only” for 5 years, a monthly burden of possibly €2,700 Oo

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What do you say then about Variant 1 with Riester loan, 2 KfW loans and annuity loan? Would that offer then be safer after all?
The Riester loan would have a 20-year fixed interest rate. But the annuity loan only 10 years.
The disadvantages of the Riester loan are known, but the advantage is faster repayment through subsidies.

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I will also have a Variant 3 calculated with a pure annuity loan for 20 years. However, only a 1% repayment would be possible here.
Is that okay? Or should I try 2% repayment on a 10-year fixed interest rate? What is better?
And always rather 20 years fixed than 15 years? Since the interest rate difference is not that high?

Thanks for the help.

Hello Chippy

the problem is there is no right or wrong here. It always costs a lot of money and in the end you have to decide for yourselves what the best option is. For my part, I am a fan of a normal annuity loan.. 20 years fixed interest rate. That way my risk is manageable and through special repayments I can save quite a bit on interest especially in the first few years.

With option 1, personally the Riester would bother me, unfortunately there are many factors here (what if you want to move in 10 years, have to, you move into a rental etc... you never really know what time will bring ...) that are not quite clear to me yet. I would rather continue to contribute to the Riester and use it later for retirement. But that is just my own opinion! However, it is clear here that in 10 years the KFW loans will expire - how do you want to cover that? Maybe you have an existing building savings contract that can then replace the KFW loans?

Option 2 with the building savings contract is also a bit unclear to me with the calculation. Take another look at the repayment plans etc. I think then it will be a bit clearer. Or have a third person explain it to you again. Often a different way of explaining helps as well.

We also had a conversation with the insurance regarding the financing (pension insurance that then repays the loan....) even here upon a second look it was clear that the portion of interest is, in my opinion, much too high. Unless the return on the pension contract is correspondingly high... but unfortunately we are not clairvoyant.

For this reason, ask questions... ask questions... until really all uncertainties are cleared up. This is about too much money to just sign off on it like that. Sit down with the advisor again, look at all the repayment plans. Then at some point you will have the overview and can decide what is right for you

With a normal annuity loan with 1% initial repayment, you pay off the loan over 40 years or longer. With 2% repayment, you’re somewhere around 30 years.

With a short fixed interest period, the rate can shoot up depending on how the interest rates develop.

Therefore, I would rather recommend 20 years fixed interest period, with 3% repayment, but then the rate will be too high.

The rate must not exceed €1,400? What about savings rates for possible special repayments?

In variant 1 you have €220,000 that must be refinanced after 10 years, what is safer there?

I also don’t think the broker’s suggestion to also use a Riester component in variant 2 is correct. Especially since it is not yet properly defined. And with a change in the savings rate in the building savings contract, the term or possibly the allocation is extended.

What kind of advisers are these actually?

Hello everyone, hello Chippy,

first of all – the KfW conditions have been outdated since today.
For your options, the following interest rates apply as of today:
KfW 124: 2.85%
KfW 153: 1.90%

Question:
Does the building savings contract have no – minimal – interest on the credit balance (I am not very familiar with the contract variants)? If I calculate the 504.00 euros you stated x 12 months x 15 years, I get exactly the 90,720 euros calculated by financial experts. This would assume an interest rate of 0%.

Personally, I am not a fan of offers with repayment substitution, whether it is a building savings contract or a life insurance policy (unless you already have a contract that is being saved anyway). I prefer the annuity loan. Why, the following calculation should show you:

You pay a monthly savings rate of 504 euros with the building savings contract.
If you put the 504 euros into additional repayment every month, you would have paid off after 15 years

[*]90,720 euros + compound interest.

So, the repayment only occurs after 15 years.

This means you would forfeit a compound interest effect of approx. 22,750 euros (if my Excel is not mistaken).
In addition, you pay a closing fee on the building savings contract of 3,360 euros.
In total, this makes a difference of 26,000 euros, which can be better used for repayment.

In my opinion, the only advantage of the building savings contract lies in the cheap follow-up interest financing (2.75% over 15 years) – but you are paying for this with a “low interest/zero interest return” in the savings phase.

I cannot say much about Riester. You have already heard from Naddl about difficulties with moving. Moreover, according to information, issues can arise with points such as divorce. I know, you don’t think about that, but what if? Get further advice on this.

Regarding your offer 1, I also noticed:
Terms of about 35 and about 48 years – well, you can shorten with special repayments, but if not – how old are you that you can finance for 48 years?
Try to secure a long fixed interest rate. Possibly, a small, manageable amount can also be financed variably (= very low interest rates), but then you must also consistently use the difference for rapid repayment.

So we have also been racking our brains about this for a month. Because we also have to borrow the same amount. so 400,000 euros. 50,000 KFW which has increased by a whopping 0.4 with the smallest repayment within 3 weeks. Since we find the building savings scheme too stupid (closing fee etc.) we decided that we will fix the remainder, 350,000 euros, over 30 years with an interest rate of 3.48% and 1% repayment. Interest rates are current today. With the KFW we come to 1480 euros. without KFW 1300 euros. The remaining debt is 169,000 euros. after another 9 years the loan is paid off. at that time we will be 69 years old. We are both 30 years young. Special repayments are not yet included. We earn a little more than 4200 euros net so why not invest 80 euros more monthly and not have to worry about what the interest rate will be in 10, 15, 20 years. Of course, we also had a comparison offer... several even.