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

Addendum:

Your advisor used the full €410,000 for the loan-to-value calculation. No bank I know does that. But this is how he got below 72%.

Example: A family needs a total of €100,000 with €0 equity. However, the loan-to-value is not 100%. Because: The bank says the house would bring in €90,000 if sold. So now €90,000 corresponds to a 100% loan-to-value. If the bank now gives €100,000 to the borrower, the loan-to-value is just under 112%.

And this calculation was applied to you as well. That’s why instead of 72%, you are now at 88%. Because the bank assumes a significantly lower value. This has less to do with your job and more with the location and construction. These probably drive the estimated value down and thus cause a higher loan-to-value, which increases the interest rate.

Have your house bank (or a bank nearby where you are building) make you an offer; they often know the real estate situation in the area better than banks that are too far away and cannot assess the situation but can only rely on average values. Maybe the house bank estimates the value higher because they have had positive experiences with resale values in the area. That could drive the loan-to-value down again.

Hello emer,
thank you for your addendum. According to our "consultant," the chosen bank is the only one that does not automatically deduct 10-15%. So much for that.
On Monday, it's back to the house bank. Let's see what comes out in the end...

Hello emer,
thanks for your addition. According to our "advisor," the chosen bank is the only one that does not automatically deduct 10-15%. So much for that.
On Monday, we're going back to the home bank. Let's see what the bottom line is...

Keep us updated.

So:
We have relieved the first advisor of his duties after various misinformation he provided and found a new advisor who was recommended to us through the family. They are making a great effort and on Monday we will sign documents for the next application.
15-year bullet loan (WITH a special repayment option of 5% p.a., which is apparently quite unusual) and in parallel a home savings contract is being built up. Both values are better than the last offer from the first advisor. The banks currently seem to have a processing time of up to 15 days, we’ll see...

Hello,

The headline and the topic fit like a hand in glove, so I'm joining in here (If not desired, I can also start a new thread.)

I too was/am very biased against financing with a building savings contract.
- A bank advisor/banker earns well from it. -> Rarely are there two winners...
- It is opaque for a layman... (Compared to an annuity loan)
- Saving while having debt. How does that fit?
- More unstable structure due to allocation of the BVS?

Now I went to my house bank and had a financing plan created for both variants.

310,000€ total costs
60,000€ equity
250,000€ financing requirement

WohnRiester: 140,000€, without claiming subsidies, nothing else is in it than a prepaid building savings contract.
Building savings contract: 98,000€, replaces KfW153 and loan after 10 years. Serves to fix the interest rate of KfW153 + loan for the entire term.
KfW153 50,000€, interest is paid for 10 years, replaced after 10 years by building savings contract.
Loan 60,000€, low repayment, replaced after 10 years by building savings contract.

The following is paid:
Years | Wohnriester | KfW153 | Loan | Building savings contract | Total
01-10 | 653.33 | 79.17 | 237.50 | 291 | 1261.00
11-14 | 653.33 | 0 | 0 | 577 | 1230.33 (Building savings contract loan takes over KfW153 + loan)
15-21 | 737.00 | 0 | 0 | 577 | 1314.00 (Wohnriester switches from saving -> loan)
22-24 | 737.00 | 0 | 0 | 0 | 737.00 (Only Wohnriester loan anymore)

Financing costs of 97,018.76€.
According to the advisor, the financing costs offer a better comparison possibility to other products because many providers "trick" with percentages. He will provide this to me later.

I calculated it myself with the nice Excel sheet from f.....test: Effective interest rate: 3.09%.

As an alternative annuity loan, he presented me with the following:
250,000€, effective interest rate: 3.78%, fixed interest period: 29 years, financing costs: 169,152.08€.
The installment payments increased after 10 and again after 20 years. For whatever reason...

Somehow I have the feeling that I am currently comparing apples to oranges, as the longer term and low payments at the beginning lead to low repayment, which increases the financing costs. Am I right in seeing it that way?

But with my equity (and a monthly rate of 1250€) I don't even come close to the 3% effective interest rate for an annuity loan over 20 years. The residual risk could be borne.

Best regards, Ojemine

I don’t understand a thing about what you’re presenting.

What does your advisor/bank say about the fees of the whole building savings scheme and the tax on the residential Riester? Are they included in the nearly 97,000 financing accounts? If not, then they are not the financing accounts...
Why so many building savings contracts if you don’t use the “earned” interest after allocation in a loan? That’s what they’re actually meant for. Here you’re just replacing one with another without using the “advantages.” In the end, you’re making them useless.
You pay interest and fees forever, and in the end, heavy taxes on top.

Regarding the annuity calculation, how high is the initial repayment, the amount of the installments?

It should be clear to you that the same person who calculates this insane “Riester-, building savings-, KfW-, high-interest 60,000€ loan, nobody-understands-it construct” also shows you in “comparison” a shockingly overpriced “I’ll just throw something together” annuity. The other option is supposed to seem cheaper – but in most cases(!) it isn’t.

Have another banker properly calculate a 200,000€ annuity + 50,000€ KfW for you.

So far, it really is an apple/pear comparison.