Construction financing with deferred repayment

Hello everyone,

we want to buy a condominium. For this reason, I had the financing calculated by various providers. Different options were presented to us. I would like to hear opinions on one of these options.

Among other things, we were offered financing with a payment deferral. That means I would only pay my interest for 15 years and the repayment amount would flow into a building savings contract.

In numbers, it would look like this.

Loan amount: €120,000
Interest rate: 4.85%

Loan installment including 1% repayment approx. €580 monthly.
1% repayment corresponds to approx. €100

We would then pay €100 monthly into the building savings contract to arrange the follow-up financing after 15 years, with an interest rate security of 3.9%

The gentleman said this would be the safe financing option. According to him, about 95% of financings run this way.

I myself am not quite convinced, since after 15 years I would still owe the entire purchase price.

What do you think? Should I better keep my hands off it? Or is it a good option that is indeed used in 95% of cases???

Hello Moser P,

the suspension of repayment makes sense if the condominium is rented out and the tax deductibility of the always equally high monthly burden is given. I do not see the advantage in owner-occupancy.

You might need to explain the numbers, for example how much your loan will still be after 15 years, at what percentage the building society savings contract must be accumulated, how long it will then take until allocation, etc. After 15 years there are about 20k in the building society savings contract, with 50% accumulation you would receive €40,000 as a loan but would still have around €100,000 of remaining debt.

you said you consulted various people, did you also confront them with the offer?
they are probably commission-driven and not entirely honest, but they certainly have knowledge.

A suspension of repayment through a building savings contract does not seem very sensible to me, I suspended repayment years ago and used an existing life insurance policy for it. But economically it is only interesting, as already mentioned by a previous writer, for apartments where you have rental income.

These offers are purely commission-based. I would stay away from them. You only end up with more costs, and as you yourself write, you are stuck with your original loan for a long time. Take a "normal" annuity loan, because that is 99% the right choice for home financing!!

Hello Moser_P,

I also recommend using the 1% direct repayment and voluntarily saving additional amounts of capital on the side (either a savings plan, a home savings contract, or a fund – depending on what type of investor you are).

If you repay your loan with 1%, after the first 10 years you will still have an outstanding debt of about 87% of the original amount. And for this amount, you have an interest rate risk that you should try to minimize in the manner described, if not completely eliminate.

Best regards
M. Thiemann