Financing with building savings loan + KfW + subordinated loan

Hello everyone,

my first post here is on the topic of financing, as I am now quite confused about our financing.

We want to build a small single-family house with about 160sqm and expect total costs of around €550,000. Through own contributions, etc., the amount is reduced to around €530,000.

We would have liked to bring in equity, but we invested that last year in the renovation of our apartment because we had not expected the development of the building area (there is a longer backstory here).

An independent financial advisor who works with the developer also advised us accordingly, and last week we received the offer:

€374,000 for 20 years at 1.35% -> building loan with repayment substitution in building savings contract
€100,000 for 10 years at 0.75% -> KFW 153
€57,000 for 15 years at 4.59% -> subordinate loan with the possibility to repay anytime with max. 1% fee

monthly amount ~ €1600

We were offered the combination like this; until then, our goal was about ~€1300 per month, ± €100, depending.

The biggest argument was that the "equity" is increased through the subordinate loan, making 20 years at 1.35% possible. Since the local banks with a big red S caught us at €1800 (annuity loan with 1.4% and 2.5% repayment (repayment not negotiable and fixed!)), that didn't seem so bad to me.

As fate would have it, an acquaintance was there and we talked about it on the side, and he immediately threw his hands over his head and advised us to go to another bank, possibly with only a 10-year term but as an annuity loan where the interest burden decreases. Possibly also pay into a building savings contract on the side but not like that, was the statement. I calculated with the values at PSD and ING, which according to first contact would grant interest rates of 1.01% and 1.11% respectively on €431,000. The difference over 10 years is over €36,000.

ING does not do 20 years for new buildings, 15 years are excluded due to the combination with KfW. PSD might also do 20 years at >1.3 to 1.5% (depending on options in the contract).
I would be at about ~€1302 with ING, with PSD between ~€1290 and €1550 depending on the term. A review has been initiated with both banks; feedback will follow in the next few days.

This has now extremely confused me; at the moment we do not know whether the initially considered good offer is still "good" and whether it might make more sense to only go for 10 years.

Edit: We have received a verbal "commitment" for the first-mentioned offer (application for financing was sent to the bank); the final contract will only be signed after the visit to the notary, and the land charge will only be notarized at a second appointment. I asked for a written commitment, but everything was said to be fine and we could go to the notary regarding the land purchase (which we had postponed). The fact that the contract is not yet signed still gives us a chance to possibly find another solution here, but it was/is somewhat suspicious to me nonetheless.

Since the local banks stopped us at 1800 with a big red S (annuity loan with 1.4% and 2.5% repayment (repayment non-negotiable and fixed!)), that didn't seem so bad to me.

To be honest, that's a killer offer. I think it's really good for your situation. You pay the Sparkasse about €600 interest per month. In the constellation you mentioned, it's already about €700, so significantly more. Can't the Sparkasse still be combined with KfW?

ING doesn't do 20 years for new builds, 15 years are excluded due to the combination with KfW. The PSD might possibly also do 20 years at >1.3 to 1.5% (depending on options in the contract). With ING I would be at ~€1302, with PSD between ~€1290 and €1550 depending on the term. An evaluation has been initiated at both banks, feedback will come in the next few days.

What exactly does the constellation look like? Only PSD/ING or also with subordinate loans? I don't understand what exactly you are calculating. For full financing, I would rather take 3% repayment; the Sparkasse is already quite sporty.

Good evening,

I would be interested in the breakdown of the total costs here? Because with the 57,000 EUR you are certainly also paying part of the incidental costs, right? Because if the equity capital is not enough for the incidental costs, then there is no financing at ING, only rejection!

So please list:
- Land costs
- Ancillary purchase costs (on the land)
- House construction costs
- Additional construction costs
- Outdoor facilities

Then how high the equity capital is + the own contribution! (with some banks you can play very well with own contribution if the architect cooperates, and thus get better interest rates!)

PS. with a loan amount of 531,000 EUR, and a monthly rate of 1,300 EUR, the annuity would be at 2.93% (so for interest and repayment!) and that is NOTHING! so if you only pay 1% interest, you should try to repay 3% = 4% = optimal rate, which ONE should afford: 1,770 EUR so the savings banks are not that far off!

Since everything here is calculated "VERY TIGHTLY," a very long interest rate lock would be VERY important to me... because with 1,300-1,400 EUR per month you don't pay off much of 531,000 EUR = nasty surprise in 10/15 years when the interest rates have risen, and suddenly you have to pay 2,500 EUR for the remaining sum.

That means a combination of bank/building society can certainly make sense. I would be very curious about what you will do with the KfW in 10 years if about 60,000-65,000 EUR is still outstanding? Will you secure it separately with a building savings contract? that would be an additional monthly burden of 150-180 EUR

Hello, welcome to the forum. The advisor has a mixed interest rate of 1.58%, the Sparkasse has 1.35%, whereby the mixed interest rate with KfW should decrease again. I would definitely choose the Sparkasse. Like P-Kosmalla, I also see that more repayment is better. Honestly, if you can’t manage the rate of €1800, then no special repayment will be possible in the advisor’s variant either. I don’t know to what extent your financial situation allows higher installments, but with only 2% repayment you are taking a very high risk. Maybe the advisor can still find a variant between Sparkasse and the first one. I think he optimized the monthly rate as low as possible at your request, right?

Hello

run the broker for a while?

Honestly, this is a fantastic offer. I think it’s really good for your situation. You are paying about 600€ per month in interest at the Sparkasse. With the constellation you mentioned, it’s already about 700€, so significantly more. Can’t the Sparkasse still be combined with KfW?

What exactly does the constellation look like? Only PSD/ING or also with subordinated loans? I don’t understand exactly what you are calculating. For full financing, I would rather take 3% repayment; the Sparkasse is already quite sporty there.

The Sparkasse wanted us to sell our apartment where we currently live (also financed by the Sparkasse). Since there are still 4 years left until the end of the fixed interest period, we would also have to pay a prepayment penalty of 25,000€.

Good evening,

I would be interested in the breakdown of the total costs here?
Because with the 57,000 EUR you are surely also paying part of the ancillary costs, right? Because if the equity is not enough for the ancillary costs, then there is no financing at ING, but only a rejection!

So please list:
- Land costs
- Incidental purchase costs (for the land)
- Construction costs of the house
- Additional construction costs
- Outdoor facilities

Then how high the equity is + the own contribution!
(with some banks you can play very well with own contributions if the architect cooperates and thus get better interest rates!)

PS. With a loan amount of 531,000 EUR and a monthly rate of 1,300 EUR, the annuity would be 2.93% (so for interest and repayment!)
and that is NOTHING! So if you only pay 1% interest, you should try to repay 3% = 4% = optimal rate that ONE should be able to afford: 1,770 EUR
so the S-banks are not that far away!

Since everything here is calculated "VERY TIGHTLY", a very long interest rate security would be VERY important to me... because with 1300-1400 EUR per month you are not paying off much of 531,000 EUR = nasty surprise in 10/15 years when the interest rates have risen, and suddenly you have to pay 2,500 EUR for the remaining sum.

That means a combination of bank/building society can definitely make sense.
I would really like to know what you will do with the KfW in 10 years when around 60,000-65,000 EUR is still outstanding?
Will you secure it separately with a building savings contract? That would be an additional monthly burden of 150-180 EUR

The land is supposed to cost 99,100€, 20,000€ are budgeted as own contribution. 431,900€ are for the house, carport/garage, all ancillary construction costs, preparation of the outdoor facilities, preparation of the photovoltaic system.

In the first offer (building savings contract + KfW + subordinated loan) 7,500 are included for incidental acquisition costs. At the time, we were advised to invest the saved money in other things or keep it as a reserve. If something remains at the end, possibly for repayment of the subordinated loan.

For ING, the 7,500 are counted as equity, 423,500 ING + 100,000 KfW + 7,500 equity + 20,000 own contribution.

Currently, I am the sole earner, my wife will probably be employed again in 2 years. The plan was that if it works now, it can only get better later, since my wife’s future income should go almost entirely into repayment (ING allows adjusting the repayment 2x free of charge), and that should be possible with the building savings contract.

For the KfW redemption, we have two existing building savings contracts that will already be fully built up (overfunded) in about 2 years. That would completely cover the KfW residual debt in 10 years.

Hello, welcome to the forum.

The advisor has a blended interest rate of 1.58%, the Sparkasse 1.35%, whereby the blended interest rate with KfW should drop again. I would definitely choose the Sparkasse. Like P-Kosmalla, I also think more repayment is better. Let’s be honest, if you can’t afford the 1800€ rate, then there won’t be a special repayment option in the advisor’s variant either.

I don’t know how much your financial situation allows higher rates, but with only 2% repayment you are taking a very high risk. Maybe the advisor can still find a variant between the Sparkasse and the initially mentioned one. I think he optimized the monthly rate as low as possible at your request, right?

We did not directly commission the optimization like that; we wanted a healthy mix between a low rate and a reasonable loan with the option to make adjustments in 2-3 years if needed (then there will be two full salaries again, currently only one salary). As mentioned above, the Sparkasse was not the problem because of the rate itself, but the existing property was a problem for the Sparkasse.

Regarding KfW, we got nowhere with the Sparkasse because the apartment had already been criticized beforehand.