Follow-up financing - under what conditions?

My financing bank offered me a prepaid home savings contract without a new mortgage. Conditions are 1.5% for the prepaid money, then 1% after repayment. Basically even cheaper than the original loan, and done after about 10 years. However, Ing-Diba probably does not have such a product. Instead, there is the residential loan for property owners. Around 3% interest, so not really a bargain.

Almost all banks now finance loan requests under 50,000 EUR without collateral, as the effort associated with an IVD (compliance with the requirements of §18a KWG or WiKR) otherwise erodes the margin.

Such loans are called "handshake loans" in the savings bank sector, for example. Conditions range between 1.80% and 3.20% p.a., depending on the fixed interest period and credit rating.

Example of good creditworthiness with a 10-year fixed interest as a full repayment: around 2.00% p.a.

Request such a loan from your house bank as well as from Ing-Diba. Assuming you have already been repaying for 2 years, you should already have around 22,000 EUR of free mortgage parts. Then Ing-Diba would likely be cheaper than a non-collateral modernization loan or handshake loan at the house bank.

I am currently preparing for the conversation with the banks and some things are still not quite clear to me. You write that we should therefore have achieved about 22,000 EUR or more in free mortgage parts. To me, that seems quite high. I checked yesterday and as of yesterday, we currently have 17,000 EUR less debt than at loan issuance. That seems more plausible to me... because at the beginning one still pays a higher portion of interest than actual principal repayment. You also write that Ing-Diba might then possibly be cheaper than the house bank or a usual renovation loan/handshake loan. What exactly should I ask Ing-Diba for in this regard? I am not familiar with this and currently can’t make the connection.

I have checked and the interest rates for a modernization loan are really steep compared to other rates. Phew. I almost fear this might be a bit too much for us.

: What does the abbreviation ZE stand for? Well, asset statement... that will be a short list. Apart from the car, which should be sold anyway (because we simply don't need it and it only costs money) and will still bring around 7,000–9,000 EUR, we have nothing significant in savings or elsewhere. I have only been working regularly since September 2019; before that, we couldn’t save anything and the savings went into the house purchase.

: Thanks for the tip. True, Ing-Diba wouldn’t have something like that. Still a good thought. Because our house bank does have something like that.

On the subject of the dormer and the bathroom. So, obviously, the dormer would have to be installed because the chance won’t come again in the next decades. But regarding the bathroom, we would first just discuss it with the plumber and, apart from the rough installation and the tiles, do everything ourselves. We managed well with the other bathrooms, and the shower is not urgently needed right now, but later, when the children are older, it would definitely be practical. In that respect, I wouldn’t plan to spend huge sums on the bathroom for now.

There is the home loan for property owners. Around 3% interest, so hardly a bargain.

I find that more than fair for a loan completely without collateral. And compared to history, it's definitely a bargain. For a €40k loan, that's only €100 interest per month. Honestly, with that interest burden, the interest rate doesn't really matter. Whether it's €50 or €100 per month. If that (= €50 more or less) bothers you, you shouldn't finance at all.

We are just the kind of people who only want to finance as much as they could manage with one salary if necessary for a while. It's not about 50€ more or less for me, but overall the rate just must not become too high. We actually didn't want to finance a cent more, so yes, it doesn't feel great.

In mid-March, the construction engineer will first come and take a look, possibly looking for alternatives. Until then, we want to roughly outline the framework with the bank and check the options (which type of loan is possible/sensible, etc.).

You write that we would have achieved about 22T or more in free land charge parts. That seems quite high to me. I checked yesterday and as of yesterday we currently have €17,000 less debt than at the time of the loan. That seems more plausible to me....

That's true, you are absolutely right. I slipped in the repayment plan row. 17 TEUR is exactly correct.

You also write that Ing-Diba might possibly be cheaper than the house bank or a usual renovation loan/handshake loan. What exactly should I ask Ing-Diba for in this regard? I don’t know much about it and I’m not making the connection right now.

The loan type is referred to differently at each bank, but that is not really relevant for you. You just have to request a loan of amount X from Ing-Diba and specify the purpose as precisely as possible. Best in the form of a cost breakdown.

I checked and the interest rates for a modernization loan are really steep compared to other interest rates. Phew. I am afraid that might be a bit too much for us then.

I don’t quite understand that now... I thought the roof had to be done? Alternatively, you could also borrow money within the family....

: What does the abbreviation ZE stand for? Well, asset statement...it will be a short list. Apart from the car, which should be sold anyway (because we simply don’t need it and it only costs money) and will still bring in about €7,000-9,000, we have nothing substantial in savings or elsewhere. I have only been working properly again since September 2019, before that we couldn’t save anything and the savings went into the house purchase.

ZE stands for Zweck­erklärung (security agreement for the land charges).

An asset statement must be submitted anyway. Banks also have their own forms (self-disclosure) which they provide during the loan application.