Financing through building savings? I also don't see the catch.

Hello,

like the previous thread, I was at a bank today regarding our construction financing.

Equity 160,000
Loan amount 290,000
Total costs 450,000

We were now offered a construction financing from Schwäbisch Hall (Fuchs WohnRente) with Riester + a KFW loan.

For the 240,000€ we would have an interest rate of 2.5-2.6% over 24 years and pay about 1200€. After 24 years, the loan would be paid off.

I find the interest rate very good. Otherwise, for 15 years in a normal financing, I just get 2.7% and then still have the risk with the follow-up financing if the interest rate might be high then.

I would be very grateful for any assessments!

Thank you very much and best regards!
Uwe

Hello

Have you ever approached a broker (e.g. Interhyp) Interhyp is good, or a proper "bank" not a savings bank / cooperative bank? I don't think much of building savings contracts or residential Riester with the current interest rate level. You first have to save money into these products which are low or not at all interest-bearing. If you use the money for special repayment / increasing the repayment in the monthly rate (annuity) you will do better.

Of course, most people are afraid of what happens after an interest rate fixation period. In that case, I would alternatively have a 20-year interest rate fixation offered. Of course with an option for special repayment. You would be surprised what leverage special repayment can have.

at 2.5% over 20 years you’ll be done faster with a rate of €1200 than in 24 years.

Hello,

but I don't get 2.5% for 20 years?!

One question I still can't figure out mentally:

Assumption/theoretical example: 24 years of regular financing at 2.5% compared to building savings contract for 24 years, 2.5%

Is that really comparable? That means, is the remaining debt exactly the same after 24 years?

Hello,

but I don't get 2.5% for 20 years?!

One question I still can't solve mentally:

Assumption/theoretical example: 24 years normal financing at 2.5% compared to building savings contract 24 years, 2.5%

Is that really comparable? That means, is the remaining debt after 24 years exactly the same?

Hello

that is not so easy to answer. Of course, with a building savings contract you have the advantage of concluding a follow-up financing at a fixed rate. However, many forget that this option is very expensive. You have closing fees, very low interest rates, overall (usually) a negative yield. That is how a building society makes a living. And it could be the case that between 10-15 years of your construction financing we have similar interest rates and you could refinance. Then you would regret having bought such an expensive product.


It makes more sense to use special repayments and use the accumulated capital there. I would never deny the 2.5% for 20 years either!


It exists in your constellation! And if it then becomes 2.6%, you are still better off.

Just give Interyp a call!

Hello,

but I don't get 2.5% for 20 years?!

One question I still can't solve mentally:

Assumption/theoretical example: 24 years normal financing with 2.5% compared to building society saver 24 years, 2.5%

Is that really comparable? That means, is the remaining debt exactly the same after 24 years?

No, it is not comparable.

With the building society saver, you initially do not repay, so the 2.5% interest always has to be paid on the full amount.
The credit balance, on the other hand, is only credited with an assumed 0.5% interest.

With the annuity loan, the remaining debt always decreases.
A 20-year annuity loan with 3% will probably be better than the building society saver with 2.5%.
Exactly where the boundary lies can be calculated, but for this, you’d best need the repayment plan of the building society saver.
In some cases, there is also an effective annual interest rate over the entire term that would then be somewhat comparable with the annuity loan.