Financing plan end terrace house

Hello,

we spontaneously received the offer to buy an end-terrace house. The developer referred us to a financial advisor for an initial assessment, who made us the following offer.

Key data:

[*]REH, new build
[*]129sqm, 2.5 floors
[*]Plot 280sqm
[*]very good location
[*]House price: €494,000
[*]Property transfer tax: €32,100
[*]Notary: €7,410
[*]Land registry: €2,470
[*]Total: €536,000
[*]equity contributed: €42,000 (additional purchase costs)
[*]financing requirement: €494,000

Personal key data:

[*]You: 30, employed, €2,500 net
[*]He: 36, employed, public service €2,500 net, increasing quickly in the coming years, as only at experience level 1
[*]Baby: €219 child benefit
[*]Total household net income without special payments: €5,219

Financing plan:

Option 1

€374,000 from Volksbank
1.51% effective interest
15 years fixed interest period
2.25% initial repayment
€1,165 per month
34 years term
up to 5% special repayments
2x free repayment rate change

€120,000 KFW 153 loan at the known conditions.
€403 per month

Option 2

€374,000 from Volksbank
1.62% effective interest
20 years fixed interest period
2.25% initial repayment
€1,1 per month
34 years term
up to 5% special repayments
2x free repayment rate change

€120,000 KfW 153 loan at the known conditions.
€403 per month

How do you assess the whole thing? Of course, we will also go to the major brokers. The interest rates have apparently risen slightly, said the advisor.

The monthly burden would be around €1,560.

Special repayments are to be made from annual special payments and bonuses.

From 01.07.2021 there will apparently be new KfW conditions that are better than the current ones. Of course, one would have to try to delay the whole thing a bit.

Thank you in advance for your opinions.

From 01.07.2021 there will probably be new KfW conditions that are better than the current ones. Of course, you would have to try to delay the whole thing a bit.

There really isn’t much of a difference. Slightly higher subsidies – but whether the condition is better, no one knows yet. Maybe the interest rates will even be worse?!

How do you assess the whole thing? Of course, we are also going to the big brokers. The interest rates have probably risen slightly, said the advisor.

Condition fits. It won’t be the money from the Volksbank that you get, but also from a third party (from the association or via a platform).

Special repayments should be made from annual special payments and bonuses.

Think carefully about whether you really need the special repayment option. No outstanding income, new house (there will be many more expenses coming your way), baby, rising standard of living with increasing income ==> from the experience of a real estate bank, I can tell you that the vast majority buy the option but (almost) never use it.

There really isn't a big difference. Slightly higher funding - but whether the terms are better, no one knows yet. Maybe the interest rates will even be worse?!

The terms are fine. It won't be the Volksbank's money that you get, but also from a third party (from the association or via a platform).

Think carefully about whether you really need the prepayment option. Not an outstanding income, new house (there will be many more expenses coming), baby, rising standard of living with rising income ==> from the experience of a real estate bank, I can tell you that the vast majority buy the option but (almost) never use it.

Thanks for the assessment. We requested the prepayment option because we want to use not only bonuses and annual special payments for repayment but also expect larger salary increases (up to 25%) and possibly an inheritance within the next 5-6 years. I should have mentioned that.

Although I can understand the note. People surely prefer to use bonuses for consumption rather than repayment.

Does omitting the option make that much of a difference?

It's already tight...
Is it realistic with 2 full salaries + baby?

Due to the low rate, you reach retirement age (36 + 34 years term)....

Does omitting the option make that much of a difference?

If the bank calculates properly, it is about 0.04% - at least that is our price.

It's tight...
Is it realistic with 2 full salaries + baby?

With the low rate, you get to retirement age (36 + 34 years term)....

Yes, we both definitely want to continue working full-time. Because we work from home 3/5 days, it fits quite well. Daycare is right outside the door and the parents-in-law are also just around the corner.

I actually find the rate quite fitting. Currently we pay hardly less rent, and with the observed expenses, it fits quite well. The additional costs are of course higher, but we factor that in.

The KfW loan is paid off after 24 years. After that, only the Volksbank loan remains. 34 years is, of course, initially just a theoretical figure. It should definitely be paid off before retirement. By then, we will normally inherit 2 detached single-family houses in good locations, each half. That is then something you have in reserve.