Construction financing with Riester loan

Hello House Construction Forum Community,

currently we are planning our construction project

After discussions with various financial intermediaries, the house bank is still pending, we currently have the following offer:

Total cost: €450,000
/ Equity: €100,000
= Financing amount: €350,000

€50,000 as Kfw at 2.38% -> €210.00 per month
€300,000 as Riester loan (25 years) at 3.51% -> €1,127.50

Total monthly burden: €1,337.50

According to the offer, we would receive a tax subsidy of €1,515.98 per year which we get refunded in the income tax return.

In addition, there is a bonus of €154.00 per person/year

Total allowance over 25 years would therefore be €45,599.50

Now comes the point where I become suspicious: After the contract expires, €17,213 must be repaid per person (my wife and I).

So from the total allowance, only €11,173.50 remain. Additionally, there are special repayments that reduce the interest burden.

Has anyone here had experience with this type of financing? Or would you recommend the classic annuity loan?

According to the offer, we would receive a tax subsidy of €1,515.98 per year which we get refunded in the income tax declaration.

Keep in mind that the special expenses deduction in income tax is limited.. I believe currently to €2,100... so if you are already claiming other larger amounts in your income tax declaration here, the tax subsidy can quickly be reduced!

Has anyone here had experience with this type of financing? Or would you recommend the classic annuity loan?

I am personally not a fan of Riester.. whether it might be worth it in this specific case depends on the corresponding offer without Riester...

I don't know how it is with [Bauriester], but retirement provision with Riester is a big scam, and it has already been heavily criticized by many financial testers. Moreover, there is still the possibility that Riester subsidies can be reclaimed by the state, if I remember correctly.

Just today I read an article about it. As soon as you sell, rent out, die or get divorced, the whole thing becomes unpleasant. Then taxes and repayments probably fall due immediately – also for the heirs. See [capital 02/2009]. Of course, I don’t know if that is still up to date! Our independent financial advisor also advised us against it... our house bank guy, on the other hand, warmly recommended it to us.

I pondered the Riester thing for a long time as well... But by now I can only *strongly* advise everyone against it! The argument that ultimately convinced me: Even if I plan to live in the house for the rest of my life – who knows if I won't need care in old age... If I then have to go into a nursing home, I have to pay back all the Riester subsidies at once! Everything else can somehow be managed – job relocations, age-appropriate apartments... – You just have to live in your property for Riester – meaning you can sell one property and buy another, but you can't buy a place in a nursing home – and the likelihood that you will eventually depend on it is quite high... So think carefully about what you do! Just because it apparently offers an advantage doesn’t mean it will remain so until the end! Regards Micha :cool: