ISB and KfW funding: What is the effective monthly burden?

Since both the ISB and KfW only have a 10-year fixed interest period, the whole calculation is actually pointless. The burden is moderate for the first 10 years. The question is how the interest rate or burden will be after the 10 years. How do you calculate that, or are 3 scenarios played through (low interest rates, current interest rates, or rising interest rates)?

How do the professionals calculate this? The remaining debt after 10 years can be determined and then calculations continue from there (with assumptions).

How do the professionals calculate that? The remaining debt after 10 years can be determined and then calculated further from there (with assumptions)

As a bank, we calculate with a hypothetical interest rate increase (6-6.5% are typical in the market for banks) after the fixed interest period expires. If the debt serviceability then (based on annuity with the mentioned interest rates + repayment to reach the term as well as current salary) does not fit, there is a "red light" and the loan is not approved or an individual decision must be made as to why we still want to grant the loan.

Since both the ISB and KfW only have a 10-year fixed interest period, the whole calculation is basically pointless. The burden is moderate for the first 10 years. The question is, what happens with the interest rate or burden after those 10 years? How do you calculate that, or do you play through 3 scenarios (low interest rates, current interest rates, or rising interest rates)?

How do the professionals calculate this? The remaining debt after 10 years can be determined and from there continue calculating (with assumptions)

Uh, no, with the ISB you can (at least 501, 502, 503) choose between 10, 15, or 20 years fixed interest period or take out a full repayment loan.

We got the full repayment loan at the beginning of 2022 with 1% interest; now the interest rate at 3.4% is still comparatively low.

We as a bank calculate with a hypothetical interest rate increase (6-6.5% are standard in the market for banks) after the fixed interest period expires. If the debt servicing capacity then (based on annuity with the mentioned interest rates + repayment to reach the term as well as current salary) does not fit, there is a "red light" and the loan is not approved or a case-by-case decision must be made as to why we still want to grant the loan.

So from currently 4 to 6% then? Why, by then you will have already repaid almost 1/3 of the entire loan (total cost of house construction). I personally find that quite high, or am I misunderstanding something Yes, sorry correct, I had miscalculated there. Yes, the 1% is now really sexy when looked at that way ;)

So from currently 4 to 6% then? Why, by then nearly 1/3 of the entire loan (total house construction costs) will have been repaid. I personally find that quite high or am I misunderstanding something

Why does a bank expect an interest rate increase? The bank just calculates cautiously, that's completely normal. The "why" question is pointless in connection with the partial repayment of the loan. The bank simply wants to be sure that you can handle an interest rate increase after the fixed interest period (the higher you repay now, the easier it will be or the better it can be calculated). Otherwise, the bank might already set the loan aside in case of a forced auction. Honestly, 6% is not high at all, many customers are currently getting 5% rather than 4% on their loan contracts. You can forget about 4% at many banks for 10 years, at best with 40-50% equity.

In the above example with a 170k KFW loan, after 10 years I end up with a total outstanding debt of approx. 313k (188k bank + 125k KFW). If I then assume an interest rate of 6.5% for the follow-up financing, I am at a rate of 313,000 * (0.065 + 0.015) = 2086 euros.

If you consider an assumed inflation/wage increase of 3% or discount the rate to today, you get approx. 2086/(1+0.03)^10 = 1552 euros. That means in this scenario it would still work.

But who knows what will happen in 10 years ... on the other hand, one (and the bank) has to plan somehow.