How to repay loans at LBS as quickly as possible?

Hello everyone,

I am a customer of LBS and now, at 24, I finally want to move into my first small condominium.

I have already saved €20,000 for this – with costs of about €55,000 for the purchase. I want to repay the €35,000 as quickly as possible to buy something bigger in 5-10 years.

I have a preliminary contract (building savings sum of €6,000, €3,598.65 paid in – the 7-year savings period will be over in August 2012)
Then a Wohn-Riester Classic S (building savings sum was increased from €29,000 to €50,000 1.5 years ago, mistake? €1,970 paid in)

LBS offered me the following:

- Reduce Wohnriester building savings sum from €50,000 to €35,000
- Reduce credit interest from 1.5% to 0.5%, but then reduce repayment phase interest from 3.45% to 2.75%
- Pre-financing loan up to €14,700 on the Riester contract!... here I have already read the following disadvantages:
* Fixed interest on the entire loan contract during the term
* No ongoing repayments
* Additional payments only possible with LBS approval
* Nominal interest rate 3.45%
* Around 31.12.2021 I will have saved the €14,700 and can then switch to the building loan, where I could also make special repayments at any time, pay only 2.75% interest, have lower interest costs every month due to the lower outstanding debt, etc.

But that takes too long and is much more expensive!!! Unfortunately,

Is there another possibility? Can I get the contract allocated faster? Can I leave the building savings sum at €50,000, pay in €15,000 and finance with only €5,000 equity? If I have to save €14,700 on a sum of €35,000, that would be about €20,000 on €50,000, right?
With an input of €15,000, I would only have to save another €5,000... but probably it’s not as simple as I think, right?
Thanks in advance for all answers

Hello everyone,

I am a customer of LBS and now, at 24, I finally want to move into my first small condominium

I have already saved €20,000 for this - with costs of about €55,000 for the purchase. I want to pay off the €35,000 as quickly as possible in order to buy something bigger in 5-10 years.

I have a preliminary contract (Bauspar sum of €6,000, €3,598.65 paid in - the 7-year savings period ends in August 2012)
Then a Wohn-Riester Classic S (the Bauspar sum was raised from €29,000 to €50,000 1.5 years ago, mistake? €1,970 paid in)

LBS offered me the following

- Reduce the Wohnriester-Bausparsumme from €50,000 to €35,000
- Reduce the credit interest rate from 1.5% to 0.5%, but then during the repayment phase reduce from 3.45% to 2.75%
- Pre-financing loan up to €14,700 on the Riester contract!... here I have already read the following disadvantages:
*Fixed interest rates on the entire loan contract during the term
*No ongoing repayment
*Additional payments only possible with LBS approval
*Nominal interest rate 3.45%
*Around 12/31/2021 I will have saved the €14,700, can then switch to the Bauspar loan, where I could make special repayments at any time, only pay 2.75% interest, have lower interest costs each month due to the lower residual debt, etc.

But that takes too long and is much more expensive!!! Unfortunately

Is there another option? Can I get the contract allocated faster? Can I leave the Bauspar sum at €50,000, pay in €15,000 and do the financing with only €5,000 equity? If I have to save €14,700 at a sum of €35,000, with €50,000 it should be about €20,000?
With a deposit of €15,000, I would only have to save another €5,000... but probably it’s not as simple as I think, right?
Thanks in advance for all answers

Um - congratulations on your saving achievement and your desire to build real estate wealth early.
But your LBS advisor might need some advising. Stay away from financing your first "small" condo via Riester. That is only possible with owner-occupied property. Ask him what happens if you rent it out or sell it 5 to 10 years later.
That recommendation makes no sense, just like the increase 1.5 years ago. Basically, I consider it more sensible to bring contracts to allocation, so keep your WR from LBS (if that’s the one you want) as it is, save into it and use it for your second property.
Your preliminary contract has reached the minimum balance and should be ready for allocation very soon. There is no obligation to hold it for 7 years (unless there is a bonus interest attached) Housing construction premium or ANSpz remain because it is used immediately for residential purposes. Assumption with loan waiver or loan assumption, although I believe the deposited loan interest is not really favorable.
You get your needed €30 to €35k as a classic annuity loan with 1-2% initial repayment and up to 10% prepayment right.
Have a nice week
JoS
Advice - but fair!

Thank you JoS for the helpful answer,

I asked my LBS advisor and he said that if I buy a second self-used property, I can keep the subsidy if I sell the first one to finance the second. Is he right?

The pre-contract includes an interest bonus, but August 2012 is not far away anymore.

Thanks JoS for the helpful answer,

I asked my LBS advisor and he said that if I buy a second self-used property, I can keep the subsidy if I sell the first one to finance the second. Is he right?

Yes, if the transition happens immediately, without detours such as a temporary rental apartment, etc. Personally, that would be a bit too uncertain for me. Since you already know that you want something bigger later anyway, I clearly recommend not to reduce the already increased (increase fee) Wohnriester now (loss of the proportional closing fee) and to bridge the gap for 9 years. Your idea of possibly making a special payment of 15,000 euros might require approval; moreover, a large part of the special payment would not be eligible for the subsidy.

There is an interest bonus attached to the advance contract, but August 2012 is approaching soon.

So it's as suspected. Just wait until 08/2012, then accept allocation without a loan but with an interest bonus and apply it as a special repayment in the financing I recommended via a classic annuity loan.

Good luck
JoS
Advice - but fair!
feel free to pm me