Financing offer with a concrete cost plan

We have now created a concrete cost plan for our project and requested a financing offer.

240,000 is to be financed.
Of that, 50,000 via Kfw70 at 1.25% fixed interest for 10 years.

The difficult choice for the remaining 190,000 would now be between:
10 years at 1.6% - monthly 800 euros including KFW repayment
15 years at 2.25% - monthly 840 euros including KFW repayment
25 years at 2.9% - monthly 940 euros including KFW repayment (+ 0.25% discount on KFW)

All loans come with prepayment options and 12 months without commitment interest.

Basically, a long fixed interest period would be our preference, but the 940 euro rate is more than we had planned and want to manage monthly.
Therefore, the rate of 800 or 840 is more likely. However, the spread of interest rates is very steep and more than I had imagined.

Personally, I therefore tend towards the 10 years with 800 euros per month and instead of prepayment, save the money separately. That way, in 10 years, one would have repaid about 15,000 euros more than with the 15-year loan.
After 10 years, refinancing can be done nicely including KFW and with the money saved alongside, the follow-up financing can be reduced nicely again.

The interest rates of the follow-up financing are always a look into the crystal ball, but here too I see the situation that the market might not have recovered as much in 10 years as in 15 years.

Now I am curious about your opinions.

As you have probably already read in other posts, the choice of the fixed interest period is a very personal decision and depends on your need for security/your risk tolerance.

You really can't compare your offers. Why do you have different rates? What do the repayment rates look like for the three variants? How long is the KFW loan supposed to run? If you tend to go for the 10 years, the question would be why you don't at least put the "missing" 40€, which would be more with the 15-year term, into repayment, so you would have repaid even more after the 10 years. Why do you actually want to set the additional money aside and not put it into special repayments, to then reduce the follow-up financing after 10 years? If you pay more immediately or make special repayments, you save significantly more in the end and finish paying off sooner.

Do you have comparison offers?

The monthly installments result from the requirements of the banks (assuming a minimum repayment of 2% annually). Our idea was 800 euros monthly and rather to make special repayments than to set a high installment.

The offers are therefore not directly comparable, that is true. But it is unrealistic that we would pay a 940 installment for the 10 or 15 year option.

Why not make special repayments? Well... for a follow-up financing, it is always better, as far as I know, to show and use a lot of equity at a bank rather than to make special repayments. At 1.6%, a special repayment is not really sensible, I think, I can rather let the money sit and earn interest.

We will still obtain comparison offers. The offer is from an independent broker who has gathered the best conditions for us from various banks. Do you think the installment is too low??

Presumably you have already written one or the other post in advance. Since I have not been around much in the main thread recently – self-performance phase – I do not know which information you have already given and therefore cannot include it.

240,000 are to be financed.
Of which 50,000 via KFW70 at 1.25% for 10 years fixed interest rate.

The agony of choice for the remaining 190,000 would now be between:
10 years at 1.6% – 800 euros monthly including KfW repayment
15 years at 2.25% – 840 euros monthly including KfW repayment
25 years at 2.9% – 940 euros monthly including KfW repayment (+ 0.25% discount on KFW)

All loans come with the right of special repayment and 12 months without commitment interest.

As far as I can see, your KfW runs over 20 years with 10 years fixed interest period. As already wrote, it would be useful if you also write down the repayment rates as well as the outstanding amount after the fixed interest period.

Based on your data, I think that for the 15-year fixed interest period, a lower repayment rate is set. If you calculate the interest difference (0.65%) upwards, the interest cost alone would have to result in a monthly surcharge of 102 euros (if the repayment remains the same). My clever calculator tells me that you have an initial repayment rate of 3.45% for the 10-year fixed interest period, 3.05% for the 15-year, and 3.03% for the 25-year. That means after 10 years, taking all loans into comparison, you would have repaid the largest amount (without special repayments).

Personally, I therefore tend towards the 10 years with 800 euros per month and instead of special repayments, put the money aside. That way, you would have already repaid about 15,000 euros more in 10 years than with the 15-year loan.
After 10 years, you can nicely refinance including KFW and reduce the follow-up financing nicely with the money saved on the side.

BUT:
You should consider that after 10 years for all loans (KfW + bank) the fixed interest period expires. Thus, you have to handle the follow-up financing for all loans – possibly at significantly higher interest rates. This point speaks in favor of the longer fixed interest period.

Do you have a particular reason why you want to save the 40 euro difference separately instead of putting it directly into the repayment (e.g. very tight budget and therefore higher reserve for contingencies)? The repayment currently gives you a “return” of 1.6% plus a higher compound interest effect. You do not get these 1.6% on a daily money account or similar.

Edit: Just read the reason.

My personal tendency is towards splitting the fixed interest period. We did it the same way ourselves (10 years KfW, 15 years 1st bank, 20 years 2nd bank). That way I have different maturities and at least aim for full repayment for the first part (with savings into an existing home savings contract – which, as long as no unforeseen costs occur, serves as a reserve until the end of the fixed interest period).

Where can you get more interest on deposits than on loans? I want that too. Finally, my retirement is saved with the golden goose.

Where did you get that fairy tale about equity in follow-up financing? That doesn't have any effect at all. Because with special repayments, less has to be financed directly. Including the equity at that point changes absolutely nothing, except that you previously paid more in interest than necessary. (Unless paragraph 1 applies)

I haven't calculated it now, but I believe there is a calculation error regarding the repayment performance between 10 and 15 years. The difference will never be 15,000 euros after 10 years with the same initial repayment rate. Rather, the 15-year loan will be more repaid after 10 years than the 10-year loan, each with an initial repayment rate of 2%.

Hello,
first of all, I agree with Bauherren2014: it is a personal decision which choice you make.

I find the interest rates very good. May I ask at which bank you are getting them?

As a basis, I would always look at the remaining debt after the end of the fixed interest period.
For the 10-year option, that would be €117,000 after 10 years.
For the 15-year option, that would be €93,000 after 15 years (still €123,000 after 10 years)
(All roughly calculated and without considering the KfW loan, which you should also take into account.)

That means with the longer term you have a remaining debt that is €24,000 lower and thus your interest rate change risk is also lower. However, you will have already paid €55,000 more.

If you instead adjust the rate for the 10-year option to €840 (making it more comparable), you will have only €112,000 remaining debt after 10 years, but will also have paid only €5,000 more.

In addition, I would look at how long you will then need to pay to repay the remaining amount. You should then run this with different interest rates. (I would personally even assume that interest rates will be higher in 15 years than in 10 years – but that is my personal assessment).

I would recommend taking out the 10-year loan and setting the repayment as high as possible (considering reserves and risks and possibly making extra repayments). That’s what I am doing now (similar situation and interest rates).