Follow-up financing experiences?

Hello everyone,

Five years ago, I bought a house right after finishing my studies. As it often is after university, there was hardly any money saved up, so the search radius for something affordable kept getting bigger.

In the end, I bought a house from the 70s for 240,000 euros.

This was 100 percent financed.

Repayment is 2 percent, interest is 1.6 percent.

Since I have basically renewed everything myself over the last five years (windows, heat pump, and so on), little equity has been built up.

What worries me most are the extremely increased interest rates.

Now I still have an ace up my sleeve.

My father was smart and gave me a building plot two years ago with the condition that I immediately build a multi-family house there. I had it built last year.
The house (about 310m2) has 3 rental apartments, which bring in 3300 euros monthly. After deducting the bank installment, I am left with 1800 euros. The loan for this house still runs for about 10 years.

My monthly income is 3500 euros net. Income is very secure since I am a civil servant for life.

Now I have been thinking for weeks about the best way to proceed to pay off both houses as efficiently as possible. Apparently, a new real estate loan cannot be obtained below 4 percent at the moment.

Put all surplus into the old building? Repay both partially or rather repay the new building?

Maybe this all sounds like complaining on a high level, but the responsibility for both houses also makes you somewhat afraid.

Best regards
Philipp

How is the multi-family house financed? How long are the fixed interest periods for the first house? What remaining debt do the two houses have then? I am currently missing an overview of the actual problem.

The loan on the [Mehrfamilienhaus] reduces your taxable income. Therefore, I would currently pay off more on the [Einfamilienhaus].

The apartment building is financed with 600,000 euros.
The remaining debt on the old house is about 215,000 euros with a remaining term of 5 years.

I see the problem almost only with the new house. It is financed at 0.9 percent. If the interest rate, for example, rises to 4 percent, nothing will be left, and the building also gets older, i.e., maintenance costs.

Best regards

You think in individual objects and partly that is also correct. You can only deduct interest on a rented property. As far as the burden is concerned, however, the total burden is decisive. For that, you think statically. The rent today will hopefully not be the rent in 10 years.

If you make special repayments, then for tax reasons initially only on the old house. That also tends to have the bigger problem with the follow-up financing because 5 years is no longer that long and in the medium term interest rates probably will not decrease. You can postpone the problem for the multi-family house for now, you only need to start thinking about it around 2027.

PS: Congratulations on going big into the real estate business right after graduation ;)

Thanks for the info.

Well, I am just a teacher, nothing special, during Corona it was relatively easy to get the loan for the second house. Without the foresight of my father, it wouldn’t have worked out either. Sometimes you also have to have some luck in life :)

Best regards