Home financing with interest loan and Riester or without Riester

Hello,
we received an offer from an acquaintance at LBS and I would like to share it for comparison with the pure annuity loan and also have some comments.
I hope the many questions don’t annoy anyone, but with every piece of information we get, the uncertainty grows about what would be the "best" way to finance.

LBS option:
15 years fixed, then building savings contract
€250,000 interest loan/building savings contract at 0.99% = €828
€40,000 annuity loan at 1.04% = €240
total monthly rate = €1068

means the first 15 years = €1068 rate
the next 15 years = €1000 rate

Total costs

€43,000
€64,200
€250,000
----------
€357,200

- Advantage: after 15 years you have interest rate security with 2.2% until the end or if the interest rate is then cheaper, refinancing.
- you can possibly redeem the building savings contract if money is available
- flexible after 15 years

Annuity loan:

Annuity loan of €290,000
20 years fixed
1.25% effective interest rate
Rate €1065
5% special repayment possible
Remaining debt after 20 years = €80,000
Including interest, then €255,000 would have been paid after 20 years for €210,000 (290,000€-80,000€)
= €45,000 interest

We have now calculated how the financing of the remaining debt could look like, hope the calculations are correct
at 5% interest in 20 years a refinancing over 10 years would cost a total of €101,000, so a further €21,000 interest until the loan is paid off.

Total costs after the end of financing
1.25% refinancing = €340,000
3.75% refinancing = €351,000
5.00% refinancing = €357,000
etc.



Means, the interest rates would have to rise up to 4.5-5% in the 20 years for the total costs to be identical. Anything higher would make the annuity version more expensive.

I cannot directly see the "catch" of the building savings contract variant(s), but basically many are against building savings contracts.
Am I overlooking something or several factors?
Too many trees, you can’t see the forest anymore :)

If interest rates remain at 1.25% after 20 years, I would be cheaper compared to annuity loan + refinancing, if interest rates rise to 5% I am still identical to annuity loan + refinancing.

With building savings contract you could make higher special repayments, fully repay, etc. With annuity loan I am always bound for time x.

I am neither a fan nor opponent of building savings contracts, but annuity loans are preferred everywhere.

Have we made calculation errors in the whole matter or...
We are more than thankful for tips or advice, because soon we have to decide how to finance?

Greetings from Saarland

I simply do not see 5% interest in my crystal ball. What you overlook is that the [Annuitätendarlehen] is just as flexible. You can cancel it at any time after 10 years. Even if the windfall comes at some point.... just let it continue running.

And then calculate again how much the interest rate would have to rise for the annuity loan to be as much more expensive as the [Bausparvertrag] currently is compared to the loan. Only then do you have the point where opportunity and risk are equal.

In which LBS tariff are you financing? Are the 2.2% for the building saver fixed or do you have a tariff where depending on how much you pay in within 15 years, you can even get better conditions?

We financed with LBS W4. The loan basically runs in the worst case with 2.25% at 30% savings. At 45% savings, the loan interest rate goes down to 1.5%.

The catch with building savings contracts for me is that your interest loan still represents 250,000 euros of debt after 15 years.

And, if you mention special repayments or extra payments... you can also make those with an annuity loan. Try playing with the financing calculator I recommended to you.

And, as mentioned, even an annuity loan with a term of 20 years can be terminated after 10 years.

And, you pay your installment for 30 years, as I showed in the example on the previous page, with a steady course you would be finished with an annuity loan after 26 years and 7 months.

Total sum of costs

43,000€
64,200€
250,000€
----------
357,200€

you calculate for the LBS variant ... I don’t understand how you arrive at that.
I calculate 15 years x 1068/month = 192,240
and 15 years x 1000/month = 180,000
--------------------------
372,240 euros repayment and interest

In this example:


After 26 years and 7 months, with possibly increased installments, which after 20 years should not be a problem:

[*]with constant 1.25 %
341,230.00 repayment and interest
[*]with increase to 3.25 % after 20 years
20x12x1065 + 79x1201 = 255,600+94,879
350,479.00 repayment and interest
[*]with increase to 5.25 % after 20 years
20x12x1065 + 79x1338 = 255,600+105,702
361,302.00 repayment and interest

As you can see, it is still so favorable that you could even reduce the installment after 20 years and then still reach the 30 years.

I simply don't see 5% interest in my crystal ball. What you overlook is that the annuity loan is just as flexible. You can always cancel it after 10 years. Even if the windfall comes at some point... just let it continue running.

That's true, but the "unknown" is how the interest rate will look in 20 years.