Is the financing option sensible?

Hello,

I’m still new here, so please don’t be mad if I ask stupid questions :-)

My partner and I want to build a wooden house, or have it built. My partner is a craftsman and is therefore taking care of the construction. I am handling organization and financing – but without prior knowledge. I have read up a bit and also obtained some offers. Since, to be honest, I don’t fully understand financing, I would like to hear a few other opinions. Of course, I have gotten advice from brokers and banks, but they are ultimately sellers... So conditions and offer (which in my opinion is the best):

House cost €164,000 (fixed price, finished, but without walls and floors)
Plot purchase price €22,000
Additional costs €25,000
Walls/floors €9,000
Total €220,000 (reserves included)

Equity €100,000
Repayment possible around €800,-
(Current rent €890,-)

Offer
€50,000 KfW, 1.0% because KfW 70, 10 years fixed interest, rate €240.88, residual debt after 10 years approx. €27,500

€70,000 from the bank, effective interest 1.5%, 10 years fixed interest, rate €553.58 residual debt after 10 years €9,653.58 special repayment 5% p.a.

Is anything missing?
Oh yes, I am permanently employed in the public sector, my partner is self-employed.

We plan to have the loan repaid at the main bank through special repayments after 10 years.

Specifically, I am currently considering a longer fixed interest period, increasing the repayment of the KfW loan in the process. The interest would probably increase significantly then. Does that make sense?

Is the interest rate (mixed rate at 1.29%) in the present offer really as good as I think?

Would other options be conceivable/sensible with our situation?

Sorry for so much text. Thanks to anyone who reads this far and maybe even has useful suggestions ;D

I can’t say anything about the conditions (except that the KFW interest rates are the same everywhere).

I consider your project to be very well positioned financially. Also, that there is such a low remaining debt on the main loan.

Because of self-employment, you will have a smaller number of possible banks for financing anyway, as they often have difficulties with self-employment.

Where did you request the offer? House bank?

I would also try with brokers. Otherwise, the combination of a 10-year fixed annuity & KFW is reasonably chosen.

Thank you very much for your response! :) So far we haven't encountered much "resistance" regarding self-employment. I'm surprised myself... We have received several offers from Interhyp, then from my partner's main bank, and from my own main bank or the LBS. The current offer is from my own main bank. The first offer was still at 1.6%. Then I presented the friendly gentleman with a comparable offer from a bank (through Interhyp) and after much back and forth (I had to emphasize several times that a building savings variant was out of the question...) this is what came out. I am now thinking whether to inquire again at Interhyp. But I already feel a bit cheeky ;) negotiating is not my thing. Or should I go to another loan broker? The question is also, is there still much room for improvement and is more effort worth it?

Hiho,

the financing looks solid, maybe something can still be negotiated regarding the Sondertilgungsmöglichkeit towards 10%. (Especially for the self-employed, more flexibility here = potential savings on interest)

In the rough cost breakdown, I somehow don't find the reserve you indicate in brackets. According to the numbers, everything just breaks even, there should still be around 15-20k room for things you don’t consider at the beginning. It saves nerves and if there’s anything left at the end, all the better (but unlikely ;))

Cheers Olli

I would still consider the following option:

50,000,-€ KfW - Energy-efficient construction at 0.85% effective for 10 years, 237.56€ monthly, RS 27,320€
50,000,-€ KfW - Homeownership program at 1.31% effective for 10 years, 247.61€ monthly, RS 27,849€
20,000,-€ from your/a bank, e.g., at 1.50% effective, 180,-€ monthly, no RS after 10 years

That leaves about 130,-€ monthly for special repayments or saving into a building savings contract that in 10 years will fully or partially repay the KfW residual debt.
Or alternatively, put the 130,-€ into repaying the bank loan. Then you will be finished before 10 years and the bank can offer you a better interest rate (e.g., for a 6-year fixed interest period).