Finance buying land or rather leave it?

Hello,

the plot is currently still being developed. So we haven't bought it yet and have only reserved it so far. As soon as the development is complete, we can then buy it. When that time comes and I have all the documents, I will go to the bank and have a few options calculated.

Hello, I understand. Before there are precise data, it's naturally still too early. I would advise you to always compare different banks and providers.

Hello,

the plot is currently still being developed. So we haven't bought it yet and have only reserved it so far. As soon as the development is complete, we can then buy it. When that time comes and I have all the documents, I will go to the bank and have a few options calculated.

I understand. So a bit of time will still pass.

Here is an update. We received the draft for the notary contract this week and therefore requested an offer from Sparkasse for a first overview of the current interest rates. The details in the offer (10 years fixed interest rate and 550€ installment) do not yet match our expectations, but I am still a bit shocked by the 4.59% effective annual interest rate. Next week we have an appointment with a broker and I hope there will be better offers. I expected that we would be around 4% interest, but I find this quite extreme. I have not yet requested an offer for a variable loan, but I will do that with the broker. Could it be that this level of interest rates is also due to the low installment and the "long" fixed interest period, or have we really arrived at 4.5 to 5% interest rates by now? In the online calculators, I usually get results around 4% with our preferred details (5 years fixed interest and 600-800€ installment).

I once heard that interest surcharges are not uncommon for loans under 100k. Otherwise, it seems there are quite strong regional differences at savings banks. For us back then, the local ones were more than half a percent above the offer we ultimately accepted, but for others that does not seem to be the case. Furthermore, over the last 3 weeks, interest rates have slowly but steadily increased again :/ KFW124 is, for example, currently also just above 4 (albeit only slightly)

but for others it doesn't seem to be like that

Last year we already got an offer. At that time, the Sparkasse was still 0.7% cheaper than the best offer from the broker. That's why I'm so surprised about the interest rate now.

We were at the broker yesterday and played through some scenarios. However, it turned out that the offer from the Sparkasse (which was now adjusted to our wishes) with an effective annual interest rate of 4.51% is actually the best, and the broker could not offer anything better with a 5-year fixed interest period. However, he was able to find an offer with a variable financing currently at 3.75% effective annual interest rate.

Our problem now is the uncertainty of whether it is worth taking the risk with the variable financing. It could be that in half a year with the variable loan we would be above 4.5% and then all offers with fixed interest would also be higher again. Interest rates are currently rising every day, and from the offer, I cannot see which reference interest rate the loan relates to nor in which time period the interest rates change.

I have looked at the Euribor as an example over the past two years. It has risen by about 0.5% every six months. If this continues, then I think we would be better off now with the 4.5% fixed interest loan.

Do you think it would be better to take the variable loan and hope that interest rates do not rise much more, or rather take the security of the fixed interest period and know what to expect? Currently, we tend to go for the 5-year fixed interest period since the broker and also the advisor from the Sparkasse advised against a variable loan.

I would think that with 5 years the variable interest rate is more attractive, even if interest rates continue to rise. You just have to calculate what the maximum payment would be for you and convert that into an interest rate. And then simply play through the probability of whether interest rates could rise by then. In my view, we will enter a (mild) recession in 6-12 months and then interest rates will probably no longer be raised. Until then, one could expect small interest rate steps again. Over 5 years, however, interest rates should fall significantly again – at least that is the plan. The economy would not be able to bear such a high interest burden forever. Is the difference really that high over 5 years? Calculate with the variable and fixed interest rate and what that interest difference means.