Financing for a house

Hi, I want to buy my parents' house. It is worth about 200k-250k €, and I would only pay 140k €. No equity is available. However, I earn about 2200€+ net monthly. My girlfriend would probably move in and might pay me around 300€ rent, but that doesn't really matter. When I was at the bank in April, I was offered an effective interest rate of 1.67%. However, I heard it has already gone up again.

I would like to pay 700€ per month (then I would be done after 20 years, assuming about 2% interest) + special repayments, that could speed things up a bit. I'm also not sure yet if I want to rent out the upstairs or not.

Now I have 2 questions:

1. What do you think about renting out? I would have to invest about 5000€ for it and would then get about 400€ cold rent. Space-wise it would be enough for me. However, I can well imagine having children in 4-5 years, and then we would need the space—so I couldn't rent it out anymore.

2. Is it possible to repay the loan with inflation adjustment at the bank? So paying 2% more each year (we get about 2% salary increase per year). That would shorten the whole thing by 3-4 years and would be easily possible. (This is also done with insurances etc.)

3. What do you generally think about it?

Thanks in advance :)

2. Is it possible to repay the loan at the bank with an inflation adjustment? So repaying 2% more each year (we also get about a 2% salary increase per year) That would shorten the entire period by another 3-4 years and would be easily possible. (This is also done with insurances, etc.)

Good idea. Incorporating a dynamic similar to insurance is very good if you want the lowest costs. Arrange in the loan agreement that you can make rate adjustments every year.

Is the property free of encumbrances or is your parents' financing still running? Your salary, after deducting living expenses, is probably just enough for the bank to provide you with the loan, so the 300€ from your girlfriend can already help further. As "rent payment," this is also not problematic.

Whether to rent out is something only you can decide. As it sounds, your focus is on the lowest costs to pay off the house quickly. It obviously helps a lot if you can repay another 300€ per month additionally.

Whether renting out is worthwhile cannot be said so categorically. One should calculate the return on investment considering the entire rental apartment.

If the mortgage value of the property really corresponds to the assumptions, that sounds like a solid matter. Some banks also offer variable repayment, i.e. the rate is changeable, and special repayments are almost always available. Therefore, I would not insist on an offer with inflation adjustment now.

If you are still interested, I can also gladly prepare a comparison for you.

@Wanek S But don't forget, every little bit more flexibility, whether it's the amount of the annual special repayment, change in repayment rate, etc., costs a bit of an extra charge, as the bank also has to purchase these optional risks or take them into account in risk capacity for the refinancing to work.

there you give him the right tip especially now in the low interest rate period banks look at how they can earn more, so such an option can sometimes become expensive, especially if you then do not use it, it is too expensive...

I do not want to claim that these costs are now increasing. The option costs have been at a similar level for years. But it is at least more expensive than necessary.