Provision interest vs. interest surcharge - financing offer

2021-04-21 01:17:25

Hello everyone, I would like to hear your opinions on our financing offers. Total costs: 687 k€ including incidental purchase costs Equity: 165 k€ Financing requirement: 522 k€ Offer 1:

[*]KFW 153: 120 k€, 1.1%, 10 years fixed interest, monthly rate 403 €, 18 k€ repayment grant [*]HVB 1: 252 k€, 1.18%, 30 years fixed interest, monthly rate 773 €, 5% special repayment annually [*]HVB 2: 150 k€, 0.86%, 10 years fixed interest, monthly rate 432 €, 5% special repayment annually Offer 2:

[*]KfW 153: 120 k€, 1.1%, 10 years fixed interest, monthly rate 403 €, 18 k€ repayment grant [*]HVB 1: 252 k€, 1.18%, 30 years fixed interest, monthly rate 773 €, 5% special repayment annually [*]HVB 2: 150 k€, 0.97%, 20 years fixed interest, monthly rate 446 €, 5% special repayment annually With offer 1, we can combine the KfW loan and the HVB 2 loan after 10 years and arrange follow-up financing. Therefore, the interest rate risk would be higher during the follow-up financing. With offer 2, we could fully repay the loan within the fixed interest period with special repayments. Then we would only need follow-up financing for the KfW loan, amounting to about 68 k€. We are aware that in all cases, we are tied to HVB for the follow-up financing. To avoid this, we would have to exercise the termination right according to the Building Code after 10 years. Which offer would you choose? Based on the specified construction time in the draft purchase contract, the latest guaranteed completion would be the end of March 2023. This means that after the end of the 12-month interest-free period in May 2022, 11 months remain in which parts have not yet been drawn. The commitment interest at HVB is 0.25% per month and 0.15% at KfW. The interest surcharge at HVB for extending the interest-free period by 10 months is 0.2% for the HVB 2 loan. We estimated and calculated this and came to the conclusion that the interest surcharge is more expensive than the accrued commitment interest. What do you think? Thank you very much

2021-04-21 06:56:38

Quickly: I would take the 0.1% surcharge for 10 more years of security. Calculate for yourself how much 0.1% over 20 years is and then weigh for yourself whether it is worth the risk to you of possibly getting higher interest rates in 10 years.

2021-04-21 07:23:09

I would take offer 2 and sleep peacefully. It is 13 euros !! more per month. 1,560 € over 10 years.

You can still consolidate the loans. After 10 years there is a special termination right without prepayment penalty.

2021-04-21 07:29:31

How much can/want you to repay monthly? Of course, it's difficult to say without knowing the financial background.

Personally, I am currently no longer a fan of ultra-long fixed interest periods like 20-30 years, also because of the special termination right after 10 years.

If you can relatively lower the €150,000 loan within 10 years, maybe not much will be left at the end? You could reduce the repayment of the 30-year fixed interest loan to, for example, 1% and then pay off as much as possible of the €150k loan?

Sure, as already mentioned by , it's only €1,560 over 10 years - nonetheless, I would consider it.

Do you really need 30 years? Have you ever considered financing the "big" loan over 20 years and the smaller one over 10-15 years?

2021-04-21 08:13:01

Hello everyone, I would like to hear your opinions on our financing offers. Total costs: 687 k€ including incidental purchase costs Equity: 165 k€ Financing requirement: 522 k€ Offer 1:
[*]KfW 153: 120 k€, 1.1%, 10 years fixed interest, monthly rate 403 €, 18 k€ repayment grant [*]HVB 1: 252 k€, 1.18%, 30 years fixed interest, monthly rate 773 €, 5% special repayment annually [*]HVB 2: 150 k€, 0.86%, 10 years fixed interest, monthly rate 432 €, 5% special repayment annually
Offer 2:
[*]KfW 153: 120 k€, 1.1%, 10 years fixed interest, monthly rate 403 €, 18 k€ repayment grant [*]HVB 1: 252 k€, 1.18%, 30 years fixed interest, monthly rate 773 €, 5% special repayment annually [*]HVB 2: 150 k€, 0.97%, 20 years fixed interest, monthly rate 446 €, 5% special repayment annually
With offer 1, we can consolidate the KfW loan and the HVB 2 loan after 10 years and make a follow-up financing. The interest rate risk in the follow-up financing would be higher here. With offer 2, we could fully repay the loan within the fixed interest period using special repayments. Then we would only need follow-up financing for the KfW loan, in the amount of about 68 k€. We are aware that in all cases, we are tied to HVB for the follow-up financing. To avoid this, we would have to exercise the right of termination according to the Building Code after 10 years. Which offer would you choose? According to the indicated construction period in the draft purchase contract, the latest guaranteed completion would be the end of March 2023. That means after the end of the interest-free period of 12 months in May 2022, there could still be 11 months during which parts are not yet drawn down. The commitment interest at HVB is 0.25% per month and 0.15% at KfW. The interest surcharge at HVB to extend the interest-free period by 10 months is 0.2% for the HVB 2 loan. We have estimated and calculated it and come to the conclusion that the interest surcharge is more expensive than the incurred commitment interest. What is your view on this? Thank you very much

I find your interest rates extremely good for the size of the loan. May I ask if you have posted any additional securities? We also want to finance soon and I have already made an initial inquiry. Total volume 510k, equity 120-150k, resulting in an interest rate of 1.3/1.4 for 15 years. I think I need to sit down with other advisors again :)

2021-04-21 09:15:02

I think your interest rates are extremely good for the amount of the loan.

That's because of the HVB. They also had by far the best interest rate for us (general preliminary inquiry to see what's possible) with very similar conditions (loan amount and equity). However, they have high requirements. They calculate with quite high household expenses and that the interest rate will rise to (I believe) 3% after the fixed period and whether one can afford that. In addition, after such and such years you theoretically have to be finished (so the repayment must be chosen accordingly high). Is there a reason why you split it into three loans?

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Provision interest vs. interest surcharge - financing offer

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