We are not making progress in financing

Hello,

We decided several months ago to build a house. The house is planned, the plot is reserved. The only problem now is the financing.
House price with everything included 260,000
financing amount: 200,000

The wish: 800-900 euros per month over about 25 years term.

Our savings bank has now proposed the following:

200,000 normal loan at 2.5% with 10 years fixed interest rate and 1% repayment.
(600 euros monthly) Remaining amount after 10 years about 177,000

200 euros monthly into a home savings contract. Additionally 7,800 annually into the home savings contract. After 10 years the 177,000 will be available at 3% over 14 years.

Now our problem.

The approximately 8,000 euros that should be paid into the home savings contract annually would be our special repayment. However, I only want to make special repayments if I think it is right. I do not want to be tied to it every year.

Is there any better solution for us somehow?

Best regards,
Micha

What about KFW? Can you really plan to pay 7.8 thousand euros annually into the building savings contract? If not, the whole calculation is screwed. I would ask myself the following question: Do I really need to have the entire amount interest-secure? Sure, this way the savings bank earns the most commission on the big building savings contract... but wouldn’t it be more sensible, for example, to conclude only one building savings contract for 100 thousand euros, which pays out 100 thousand euros after 10 years? You could then renew the 77,000 euros as an annuity loan. I consider the interest rate risk for that amount manageable. Maybe this is a line of thought...

Thanks already for your reply. I must have explained something wrong about the building savings contract. After 10 years, we would have paid in about 83,000 euros into the building savings contract and would thus be able to finance the remaining 177,000. But without this high special repayment, it wouldn’t work at all. I also don’t want to make special repayments every year.

Hello Micha,

We have almost identical house costs and loan amount. Through a large online loan broker, we also ended up at the local Sparkasse. Expected house, land, and incidental construction costs altogether approx. €280K €215K loan amount, of which €50K KFW.

I don’t have the exact figures at hand right now, but I’ll try from memory. We decided on a 15-year fixed interest rate of 2.94% for the annuity loan and 1.41% for the Kfw loan. The installment including Kfw is around €880. 5% special repayments are possible. Repayment is about 2%. Whether I’m finished after 25 years depends on the special repayments.

We didn’t even consider a 10-year fixed interest rate with the current interest situation. The option with the building savings contract was also not an option for us. Firstly, you pay 1% fee on the building savings contract and then you get 10 years less interest on the balance than you pay in loan interest. Depending on what interest rate you expect afterwards, that can be cheaper, but it doesn’t have to be. Of course, if it’s already foreseeable that you can’t or don’t want to make the special repayments every year, then you might have a problem after 10 years because your building savings contract is not yet ready for allocation. I would also be very cautious there. As a banker, apparently one can make quite good money with the building savings variant :) So it doesn’t always have to be in the customer’s best interest.

We also looked at a 20-year fixed interest rate. Due to the interest surcharge compared to 15 years, the interest rate would have had to go toward 7-8%. That the interest rate will rise again is a fact. But with an expected inflation of 2-3%, I don’t believe the interest rate will skyrocket. If, contrary to my expectations, that were to happen, inflation and thus salaries will also rise. Until then, you can make quite a few special repayments. The interest rate doesn’t jump there overnight. There are always references to the high interest rates in the early 90s (around 9%). But one should also see that there was 5% inflation back then.

Regards, Musketier

That sounds really good, of course. But I have 2 questions:

What do you do after the 15-year fixed interest period? The interest rates could have exploded by then, right?

Does the KFW loan really only cost 1.41? The lady from the Sparkasse said the effective interest rate would be 2.65.

If you can make a special repayment of €8,000 every year, you will still have an outstanding balance of €80,000 at the end of 10 years. The risk is manageable. I wouldn’t tie myself to a building savings contract.

We chose the 20-year option because we want to keep the monthly costs as low as possible, but we agreed on a 10% special repayment right. We earn enough to easily manage the 10%, and if we average 5% special repayments, the loan will be fully repaid after 20 years. Only those who plan on making special repayments need a lot of discipline. Otherwise, it backfires.