Construction Financing - What Installment Amount to Choose in Financing?

Of course you may ask

It is important to me to understand the financing concept somewhat and to check for risks. Unfortunately, I have to admit that I do not fully comprehend some aspects of the building savings contract and - especially - of the Riester pension, and as a result, I rather have to rely blindly on the advice of others. That does not sit well with me. Probably a matter of personality.

Overall, I look at the total amount that we repay to the bank/banks over the years. And I assume that it makes sense to invest "everything on legs" in repayment in the first few years. Because on every euro paid off, no interest has to be paid in all following years.

Certainly, everything has its advantages and disadvantages. For me, a decisive advantage is that I can quite well keep an annuity loan overview.

Regards.

Whereas nobody knows what the KFW will then charge for it - it's still almost half a year until then.

Definitely less than the banks usually do, as before; so overall better than annuity 20Y and kfw 10 due to the interaction.

[*]Equity: 20k € (checking account) plus land (value ~ 200k €)
[*]Demolition costs: ~ 20k €
[*]New construction costs (single-family house, 175 sqm, without basement): ~ 300k €

Thank you for the advice.

I think you need more than 300K! The 20K equity disappears during demolition, the 300K is gone with the house construction, and how do you want to finance all the additional costs, the furnishings, etc.?

My strategy for financing has always been different... First, I asked myself, just like you, how much monthly payment can I afford. Let's say simply 1200 EUR. Then I calculated the smallest possible payment. Example: 300,000 EUR, amortization 1%, interest rate for 10 years: 2% -----> results in a payment of 750 EUR (you can calculate this with any amortization calculator on the internet). I agree on these 750 EUR with the bank. Now very important: the difference to the 1200 EUR (which is 450 EUR) is consistently (preferably by direct debit) saved in a separate account. Advantages: in an emergency, you are always financially liquid, the payment is not too high in case of emergency, and with some luck, the interest on the balance will even increase over the next 10 years. Who else lends money for 1..2 %? There is no need to "pay off at all costs." I prefer to have money in my own account rather than give everything back to the bank. The whole financing is somehow more relaxed this way. Personally, by the way, I invested my monthly savings rate in a solid fund. Of course, the price often fell... but that did not unsettle me... low purchase prices are great... Planned selling should then be done (at some point, when the 10 years approach) at a high price.

The problem is that many banks do not offer 1% repayment.

Problem ist, dass viele Banken keine 1% Tilgung anbieten

That is - with all due respect - not a problem, but a consistent and correct policy of the banks with regard to the coming years

Rhenish greetings from on the road