Financing existing property - Attention beginners ;-)

Hello,

welcome to the forum! Obviously, you are good savers and also very well financeable. What I don't like about the VR offer are the many components. The mentioned Wohnriester is not necessarily needed either. By the way, the VR Bank can calculate a fictitious tax burden. For us, it would be about 20k tax back payment at age 67. We decided it doesn't have to be.

Briefly about you: - choose a long fixed interest period for the main loan at the current interest rate level (at least 15 years). What you would have paid into the building savings contract you should rather put into the repayment / special repayment. - Why was no KFW loan offered to you? At least the home ownership program is currently available at 2.8 nominal fixed for 10 years. This is quite close to the VR Bank in the 10-year range. - feel free to inquire with other banks or brokers! (e.g. Interhyp) Many here have good Interhyp experiences.

Hello,

we are also with Volksbank but thank God our advisors are not fans of 10 contracts and 5 coverages etc... we only have one existing building savings contract that we are fully funding (70,000 €) - this works on the one hand with the interest-only start period with the KFW/L-Bank loan and on the other hand with the further payment (as before). Otherwise, we put all "surpluses" into special repayments. Especially with a classic annuity loan, the special payments become noticeable from day one (we can repay up to 10% (in total) of the loan amount spread throughout the year at any time) and this way you can minimize your remaining risk. Well, and if after 10 years you still have a residual risk of 50,000 €, that can be well managed, even at 4% interest.

First calculate what you will still owe on the loan in 10 years, consider how high your special repayments will be (these must then also be made consistently) and then think about how you want to secure this amount - if necessary at all. This is how we did it with our advisors and I personally have a very good feeling about it.

Regards

Hello,

we are also with Volksbank but thank God our advisors are not fans of 10 contracts and 5 insurances etc...

Thanks for the comments!

I believe this was partly our fault, as we insisted on interest rate security and recently also took out the two Riester-BVS plans that our Schwäbisch Hall advisor really wanted to place.

Now we have an offer from Deutsche Bank:

Full repayment loan of 176,000 EUR, fixed for 25 years, 3.75% interest, 5% special repayment per year, monthly rate of 905 EUR
KfW home ownership loan of 50,000 EUR, fixed for 10 years, 2.55% interest, monthly rate of 277 EUR, remaining debt after 10 years is 29,300 EUR

Normally, the full repayment loan alone would cost about 90,000 EUR, plus the KfW interest. I am calculating what it looks like if the annual 2,500 EUR special payment, which we would have to make on the building savings contract, is put into the special repayment for the first 10 years...

Regards

What I should also mention: The 5% special repayment is possible, it has not been fixedly included in the full repayment calculation.

Thanks for the remarks!

I think it was partly our fault as well, since we insisted on interest rate security and had also recently concluded the two Riester-BVS contracts that our Schwäbisch-Hall advisor insisted on placing.


Now we have an offer from Deutsche Bank:

Full repayment loan of 176,000 EUR, fixed for 25 years, 3.75% interest, 5% special repayment p.a., monthly installment of 905 EUR
KfW home ownership loan of 50,000 EUR, fixed for 10 years, 2.55% interest, monthly installment of 277 EUR, residual debt after 10 years is 29,300 EUR

Normally, the full repayment loan alone would entail costs of about 90,000 EUR, plus the KfW interest. I am calculating what it would look like if the annual 2,500 EUR prepayment that we would have to make with the building savings contract were instead put into the special repayment for the first 10 years...

Regards

Interest rate security is all well and good. But of course, it costs you a lot and also unnecessarily.
If you factor in a special repayment of 2,500 EUR each year for the first 10 years, you will have finished repaying after 20.5 years. So why pay for interest rate security for 25 years?
If I calculate with 3.2% interest for a 15-year fixed interest period and factor in the 2,500 EUR special repayment for the first 10 years, you will have a residual loan of 41,000 EUR after 15 years. Then the interest rate could rise to 10% and you’d still be finished faster than with your full repayment loan.

Sure, interest rate security is important, but if I have saved so well so far, why shouldn't you make the special repayments... that is the crux of the financing. And as Musketier writes, the interest rate would then have to move up enormously for the expensively purchased interest rate security to even pay off. I suspect that with 20 or 25 years you will have no change in interest rates.. and with 15 to 20 years there was only a difference of 0.1 for us. Therefore, it really makes more sense to consider a shorter fixed interest period (10 years). Here the difference was 0.5%. Thus, the interest rates would have to rise to 5.9% for us to break even with the 20-year fixed interest period. I have also always been a fan of interest rate security over 25 years; for some people, that certainly makes sense, but for our project and I think also for your project, it is more the “expensively bought and not needed” option. Ultimately, it is your decision, but with the low residual risk, you should reconsider it. We are not talking about €200,000 or more that would still be on the clock... As I said, just clarify how the interest rates change with a 15-year fixed interest period.. maybe that is the cheaper alternative for you. Regards