What financing options are available for new construction?

Good evening,

we want to start with our new construction soon:

Here are the facts:

Masonry house with gable roof,
192m² living space without basement,
Offer from a construction company as a complete solution
Certain trades/services will be carried out as own work
Plot of 1,100 m² available, partially developed (rural area)

Total construction costs amount to €395,000

Equity: €70,000

Thus, financing required: €325,000

My wife and I are 23 and 28 years old and have a combined net income of about €3,800

The monthly installment would be about €1,000

We have received the following offers from Sparkasse and Raiffeisenbank:
(Status 01 or 02/16).
The starting point, however, was €300,000.
Prepayments and commitment interest are similar in both offers.

Sparkasse/LBS:
> €250,000 bank loan with 10 years fixed interest rate - 1.57% effective interest rate
> €50,000 Kfw70 (old energy saving ordinance) with 10 years fixed interest rate - 1.41% effective interest rate
> €55,000 additional home savings contract (after 10 years with 40% = €22,000 credit),
nominal interest rate 1.99% and effective annual interest rate after allocation 2.30%
Allocation of the saved home savings contract of €55,000 and repayment of part of the amount
at the end of the fixed interest period 2026 of the bank loan

Raiffeisenbank/Schwäbisch Hall:
> €150,000 bank loan with 10 years fixed interest rate - 1.57% effective interest rate
> €50,000 Kfw70 (old energy saving ordinance) with 10 years fixed interest rate - 1.36% effective interest rate
> €100,000 interest-only loan with repayment via home savings contract with 10 years fixed interest rate - 1.01%
effective interest rate - after allocation 2.44%

Explanation:
We included LBS and Schwäbisch Hall because for a part of the residual debt after the end of the fixed interest period we would like to have some interest rate security. A longer fixed interest period is unfortunately not an option. With the interest-only loan, no repayment occurs in the first 10 years. Is this sensible at all? Our goal is to minimize the residual debt after 10 years, but to partially have secured interest rates over the remaining term of the loans. Overall, we do not want to repay longer than 30 years (hopefully possible through special repayments).

I would now be interested in how you assess the two offers.
What experiences have been made with the interest-only loan?
How can the loans be divided – is the amount reasonable?
Is it an advantage to only apply the minimum payment with KfW in the first 5 years?
Are there alternative offers?
Is there anything else to pay attention to?

I would be very happy to receive feedback and thank you in advance.
If any data is missing, I can gladly provide it.

Best regards from the house builder

Hello,

I am not a fan of [Bausparvertrag]! You have a good equity / loan ratio. Just have a normal annuity loan with 15 or 20 years fixed interest offered to you. The KfW conditions are the same everywhere.

There are dozens of brokers on the internet who do this for free.

Get offered a completely normal annuity loan (i.e., without a building savings contract). Then compare the effective interest rate. If you cannot determine the effective interest rate for the building savings variant or it is not disclosed to you, then steer clear of this setup.

I see it the same way as the previous speakers. At the current interest rate level, the building savings contract combinations make little sense for most construction customers. Have yourself - if necessary through a financial broker (Interhyp, Dr. Klein, Hüttig & Rompf, ...) - provide an offer for a "normal" annuity loan + KfW combination. For the annuity loan then simply with 15 or 20 years fixed interest rate.

For example, we have currently signed (Commerzbank, brokered through Hüttig & Rompf):

Main loan 20 years fixed interest rate 2.42% (nominal) with special repayment option and repayment rate change option (annually free to change repayment between 1% and 5%) plus KfW 70 at current conditions as you mentioned (just like your old Energy Saving Ordinance) plus KfW home ownership (1.65% nominal). For the KfW loans, there was only a 10-year fixed interest rate period each. Together with the main loan with 20 years fixed interest rate, we then have enough interest rate security for our needs and, through the repayment rate change option, enough flexibility for contingencies.

Interest rates are of course difficult to compare because they depend heavily on creditworthiness and also on the loan-to-value ratio (in other words: how much equity could be used). But basically, with your equity and plans, I would advise a normal annuity loan + KfW solution.

Interest rates are of course difficult to compare, as they strongly depend on creditworthiness

Wrong. Not with financing as shown above.

I don’t understand you... why do Bauspar contracts currently make no sense?!? You can calculate everything. We concluded ours in the middle of last year, so the numbers might have changed slightly. And we had the following key figures 120,000 annuity loan with an effective interest rate of 1.61% (fixed for 10 years, 10% special repayment possible annually) 100,000 Bauspar contract with 0.25 credit and 1.3 debit interest rates (approx. 11 years fixed, then 2.5% interest until the end of the term) 100,000 Bauspar contract with 0.25 credit and 0.8 debit interest rates (approx. 11 years fixed, then 2.25% interest until the end of the term) In the Bauspar contracts, including fees and all (negative) stuff factored in (debit interest always on the total amount), this results in an effective annual interest rate of an annuity loan of about 1.6% Other offers with a fixed interest rate of 20 years were already comparable to the fixed interest rates of the BVS, so why throw away the better 11-year interest rates? If after 11 years the interest rate is even below the follow-up rates you can refinance and choose the best option at that time. If the interest rate is higher, at least you have the suspenders! The 120,000 is the "risk" because it is only fixed for 10 years. But special repayments are possible... So why shouldn’t such a variant also be conceivable for the thread starter?!?!? You just have to be able to calculate what really makes a Bauspar contract comparable, because the fees etc. can vary greatly and also the way interest is calculated must be considered, but it’s not rocket science. And I have experienced that local banks disclose all the numbers openly, while online banks often came up with incomprehensible and non-verifiable repayment plans. Wohn-Riester and tax savings (and later disadvantages) etc. are then a completely different topic. Oh yes, one tip... don’t blindly believe the effective interest rate figures given by the bank... better to recalculate!!!