Financing / 10 or 15 years - maybe splitting makes sense?

Hello,

we are new here in the forum and are planning a new build.

The decision is almost made and now it’s about the sausage - uh, financing.

The total volume is exactly 280,000Euro. This is already very detailed, broken down from the house, land (from private), ancillary costs, etc. down to floor coverings and the like - with a small buffer.

We still need to finance 205,000Euro. KFW-70 house, so 50,000 Kfw.

That would leave 155,000 to finance through the bank. Since we are planning to have children, we want to keep the monthly rate within limits. He: 2240 net, She: 1600 net (=75% fixed). We cannot plan for the remaining approx. 25% bonus. We are not married yet. Married with one child we would be at about 2720.- which might have to cover costs for 2-3 years until the wife goes back to work (parental leave but full pay - employer tops up). A reserve of 10,000 is available in a daily allowance account.

We currently get 2.32% for 10 years, 2.95% for 15 years. Repayment 2.5%.

Option 1 (10 years): 620.-, KfW 210.-, 85.- employee loan (interest-free) = 915 Euro Option 2 (15 years): 700.-, KfW 210.-, 85.- employee loan = 995 Euro

The 10-year "saves" about 9000.- interest over the loan term. For that, we would have more security with the longer one.

Would it make sense to split? In what ratio? The rates should not exceed 1000.- per month. We assume with special repayments (bonuses) a loan term of under 25 years until full repayment.

Maybe someone has a bright idea?

Regards, M.

Hello,

we are new to the forum and are planning a new build.

The decision is almost made and now it’s down to the wire - uh, financing.

The total volume is exactly 280,000Euro. This is already very detailed, broken down by house, land (from a private seller), ancillary costs etc. down to floor coverings and similar - with a small buffer.

We still need to finance 205,000Euro.
KfW-70 house, so 50,000 KfW.

That would leave 155,000 to be financed through the bank. Since we are planning to have children, we want to keep the monthly rate within limits. He: 2240 net She: 1600 net (=75% fixed). The remaining approx. 25% bonus cannot be planned for. We are not married yet. Married with one child we would be at about 2720.- that may have to cover costs for 2-3 years until the wife goes back to work (parental leave pays full money - work ramps up). There is a reserve of 10,000 in a savings account.

Currently we get 2.32% for 10 years, 2.95% for 15 years. Repayment 2.5%.

Option 1 (10 years): 620.-, KfW 210.-, 85.- employee loan (interest-free) = 915 Euro
Option 2 (15 years): 700.-, KfW 210.-, 85.- employee loan = 995 Euro

The 10-year one "saves" about 9000.- interest over the term. For that we would have more security with the longer one.

Would it make sense to split? In what ratio? The rates should not exceed 1000.- per month. We assume special repayments (bonuses) for a term of under 25 years until full repayment.

Maybe someone has a bright idea?

Regards,
M.

Hello Brian,

we have almost the same data as you. Planned costs 285K€. Loan 165K€ + 50K€ KFW and children on the way.

We decided on the 15-year option, but set repayment lower (approx. 2%) to have more room. If anything is left over (which I assume), it will be repaid early or, with rising interest rates, maybe even invested or the KFW loan refinanced after 10 years.

The amount is already split anyway, as the KFW part expires after 10 years. You then have to continue to finance or repay this. The risk for the remaining amount of maybe 35K€ is manageable.
But if you have another loan over 10 years, then you may have 70K€ or more to finance.
Since the current bank holds the first charge, you are tied to it, as hardly any bank voluntarily goes into the second charge.

The only thing that seems illogical to me in your list is the increase in parental allowance.
The more your wife receives from her employer, the lower the parental allowance is, since income is offset.
So how do you come to the same amount of money as before?

Regards Musketier

Hello, I understood it now so that parental allowance amounts to 67% of the average net income of the last 12 months. However, the employer will top up the parental allowance - so the remaining 33%. This way we will be back at 1600.-

But I have to see to what extent this may also have tax disadvantages - I have already read that 1-2 times.

At the moment, I tend to the 15-year option. But let's see - we are supposed to receive 2-3 offers from other financiers and then we will see.

Regards, M.

Ever considered taking out a 25-year full repayment loan? On the one hand, this secures the financing interest rate over the term – on the other hand, after 10 years, there is legally a known unilateral termination right for you (in whole or in part). Sure – the condition is more expensive in that respect, but even if you have to refinance at "only" 5% after 10 years, you’re biting the... We find it too risky that interest rates will rise significantly in the medium term due to the current monetary policy in Europe, so we ended up with this option and with the base condition are effectively about 0.2 percentage points above your 15-year condition. By the way, as far as I know, such long terms are only offered by insurers. Ours is from the market leader.

Hello, the offer with 20 years was supposed to come on Monday. I have also been thinking all week about how we can set ourselves up correctly and find a good compromise between flexibility, affordability, and high security. Our first financier (mlp) only focused on secure affordability and initially wanted to make us accept the 10-year option (also because of the desire to have children). At my insistence, the 15-year option turned out to be significantly better in the liquidity calculation to his surprise. Now Interhyp... is allowed to add the 20-year option and then we'll see. It's not so easy....

Maybe someone still has a brilliant idea?

No brilliant ideas, just advice:

1. In my opinion, the entire plan including the desire to have children is quite tight. Personally, that would already be too risky for me, meaning the loan burden is way too high relative to the income. If one of you becomes unemployed, the whole thing will fall apart.

2. Generally about the loan: you need above all flexibility. That means a monthly payment as low as possible (under 1000 euros if possible), with at least 5% special repayment option per year, better 10% (salaries increase over the years!). If the special repayment option is used as much as possible with some cost discipline, this reduction of the loan amount saves far more money than the slightly higher interest costs. At the same time, a low rate offers security. For the amount and conditions, I would choose a term of 15 years. Wait for Interhyp.