Financing Allocation - Two Variants

Hello everyone,

after having read a lot of information here, I have finally registered and would like to pose a question:

We are planning a construction financing of approximately €400,000. We are contributing equity in the amount of €80,000 to €90,000. The following ideas have been running through my mind and I would like to know from you what you think makes more sense and how you would do it:

We accordingly have about €320,000 to finance.
Option 1:
Take €320,000 from the capital market and fix the interest rate for 30 years, then repay everything in one go without any residual debt (maximum security)

Option 2:
Take €270,000 from the capital market (interest fixed for 30 years, fully repaid after 30 years) and €50,000 KFW loan (30 years term, 10 years fixed interest, but significant residual debt after 10 years)

Option 1 is currently somewhat more expensive, but offers absolute interest rate security over 30 years and keeps the monthly burdens clearly controlled, which could pay off quickly in times of inflation.

Option 2 is cheaper (since the financing share as a percentage of the total project is lower), but carries a considerable risk for the residual debt, which after 10 years will be subject to the then usual conditions. No one knows today what it will look like in 10 years, but I can hardly imagine that interest rates will remain that low.

In the past 30 years, construction financing had very varied interest rates (highest: 11.0%; lowest: 1.62%; average: 5.95%, based on a financing duration of 10 years, source: Interhyp interest chart). Of course, based on these Interhyp data, one can calculate the risk of how much money might be lost in the worst case, but I am interested in gut feeling. That makes the decision very difficult for me and I would like to know how you see the world.

Thanks and best regards Christian

Hello

It depends on which offer you receive. If the 1A financing is at 3.0% (fixed for 30 years), then I, for example, would not take [KFW Wohneigentum]. If you have a [Kfw 70] or better house, then the interest rates are unbeatable. I would choose this component with a total term of 20 / 15 or even full repayment over 10 years.

The 30-year fixed term is currently only offered by insurance companies. I also closed there. If you want a tip, send me a PM.

Hmm, if you have a tip for a 30-year 1A at 3.0%, I’d gladly take it ;) My best offer for the 1A is currently just under 3.4% effective for 260k€.

Consider maybe also whether you should opt for a 25-year fixed term instead of 30 years. It was considerably cheaper for me. The remaining debt after 25 years is also rather low, so even with a strong interest rate increase, not much should happen to you. Also, you might be finished sooner than 30 years thanks to special repayments. Within 30 years, one occasionally comes into money. Be it through happy or also unfortunate occasions...

Hello,
we have obtained a similar loan in the amount over the
BSK including Riester at 2.89/2.77% fixed for 25 years with 100% repayment.

Riester has its pitfalls, but if you are well informed, they are manageable.

As long as no concrete offers are available, nothing can really be said about it.

30 years of fixed interest may initially offer "a lot of security," but it can also be expensive and unnecessary.