Please assess the financing conditions

Hello dear forum community,

we have the following planned costs :
Plot 870 sqm: €95,000
Construction costs including own contribution (166 sqm, 1.5-story): €355,000
Additional construction costs: €48,000
Ancillary purchase costs: approx. €7,000

[B]Total: €505,000,

for a

financing requirement of: €396,000

with the conditions:
2 civil servants, 30 years old, children planned, current household income €5,200 (adjusted for insurance)

the following offer:
Bank 1: installment €1,294.62 for €346,000, 20 years fixed interest period, effective interest rate 2.17%, initial repayment rate 2.36%, special repayments between €1,250 and 5% once annually, calculated term 31 years, residual debt €152,000

KFW 124: installment year 1-3 €66.67, from year 4 €224.80 for €50,000, 10 years fixed interest period, effective interest rate 1.64%, initial repayment rate 3.80%, calculated term 25 years, residual debt €36,000

Total installment therefore year 1-3: €1,361.29 and from year 4: €1,519.42

We intend to fully use the 3 repayment-free initial years with the KfW partly due to possible parental leave and would rather invest the possible savings of €150 into special repayments of the larger loan.
We see the €36,000 residual debt after 10 years relaxed for now; either it will be refinanced or, if interest rates really rise significantly in about 7 years, we would no longer repay the large loan but save the money to reduce the residual debt then. The €152,000 in 20 years should also be manageable at the age of 50, especially as we realistically expect special repayments from the 10th financing year.

Is the offer appropriate for the current market situation? Many thanks for realistic assessments.

(On the topic of children, since the question will surely come up: as a woman, I intend to take only 1 year of parental leave (this is normal in our area) and have also set aside an additional buffer of €5,000, which should cover this time even with the full rate. Due to regular promotions, I could reduce my hours in 2 years while maintaining the current salary.)

You have a loan-to-value ratio of less than 80%, with 20 years fixed interest I would consider the offer average to mediocre.

For a good offer I would expect an interest rate below 2% under the given conditions. A fixed interest period of 15 years is usually available considerably cheaper at the moment. In view of the upcoming interest rate developments, many banks have built in a strong increase from 15 to 20 years. Age and expected remaining debts should be just as sustainable, but only you can answer that yourself.

Thank you for your assessment. Actually, we had such conditions in May of this year, unfortunately the development took too long. When we were finally able to fix the loan in mid-October, all banks had raised their interest rates for 20 years to over 2.4%, and even 15 years were only available at 2.2%, resulting in a remaining debt of over €200,000. After the last ECB meeting, they fortunately went down a bit again, so we were able to negotiate this offer now. Therefore, I was interested to know if anyone is currently really getting offers for 20 years at 2% or less. Then we would probably change the broker again...

Thanks for your assessment. Actually, we had such conditions in May this year, unfortunately the development took too long. When we were finally able to fix the loan in mid-October, all banks had consistently raised their interest rates for 20 years to over 2.4%, even 15 years were only available for 2.2%, resulting in a remaining debt of over 200,000€. After the last ECB meeting, fortunately, they went down a bit again, so we were able to negotiate (have negotiated) this offer now. Therefore, I was interested to know if anyone is currently really getting offers for 20 years at 2% or less. Then we might change the broker again...

We got 20 years for under 2% (just under 2 weeks ago). However, linked with a home savings contract and KfW, so the amount of the "normal" loan is significantly lower than yours.. don’t know how much that matters.

Ah moment...I just see...the mentioned interest rates are the effective annual interest rates, not the nominal interest rates? Then your offer reads quite well, at first glance.

We currently have a similar situation and have obtained a nominal interest rate of 1.99% with 2.5% repayment over 20 years for almost the same amount as you. This is currently available at Hypovereinsbank.

However, we are still waiting until tomorrow because another broker said he could beat this rate.