Which financing option for a semi-detached house?

Hi,
we are currently facing the financing of our semi-detached house.
Total price €380,000, equity €100,000, so €280,000 still needs to be financed.

The following options are now available:

Option 1:
Complete €280,000 via the L-Bank (Z15 loan)
15 years fixed interest rate, 3% interest with the first 10 years reduced by 1.5%

Option 2:
approx. €180,000 Z15 loan via L-Bank
approx. €100,000 through house bank 3.4% interest with 30 years fixed interest rate

The disadvantages of the Z15 loan are that no special repayments are possible and that the interest rate is only fixed for 15 years.

Can you help me with the decision? What would you advise me to do?

Regards, Stefan

Neither of the two. It works much better, depending on the value of the house.

We took out 250,000 at 3.1% about a year ago. Interest rates were higher then than they are today. And at that time, we already got a 20-year fixed rate and 10% special repayment options. Approximately the same equity.

Special repayments are extremely important to keep the loan cheap. If we make special repayments of €5000 every year, which is no problem with the chosen monthly payment, the contract will be fully paid off within the fixed interest period. We had considered taking 15 years, but that was only slightly cheaper. Thus, we have more flexibility for ourselves and can also skip a special repayment once in a while for a big vacation or a new car.

My written contribution with the calculations was unfortunately not accepted, so briefly.

Clearly option 1 of the two variants.

Reason: the interest savings on the €100,000 in the first years are so large that option 2 can never compensate for it.
If special repayments are really planned, you will be finished before 30 years, so you don’t need the long interest rate lock-in of 30 years.

If you really get the loan at 1.5% interest for 10 years, I don’t find special repayments important at all.
If you consistently put the money aside, you can easily cover the interest with credit interest.
Good fixed-term deposit offers for 1 year are currently at 2.x%. After deducting withholding tax and solidarity surcharge, you end up with over 1.5%.
Everyone expects loan interest rates to rise in the long term. Then credit interest rates should rise as well.

Why are you then considering the 15-year option?

Moreover, anyone building a house should be able to repay their loan within 20 years to reduce the remaining debt enough to avoid a high risk.

With a long fixed interest period, you also have higher costs over a long time. However, if you don't care about what the house ultimately costs, you can ignore that.

Thank you Musketier, that was also my preferred option. However, it is only possible to repay 2%, which means a remaining debt of about €180,000 after 15 years.

Why are you then considering the 15-year option?

In addition, anyone who builds a house should be able to repay their loan within 20 years so that the remaining debt is low enough to avoid a high risk.

With a long fixed interest rate, you also have higher costs over a long period. However, if you don't care what the house ultimately costs, you can ignore that.

Of course, I am considering the 15 years because of the super low interest rates. More than 15 years is not possible with this loan.
We simply don't have enough money to pay off the loan after 20 years.

how much can you do per month? To fully repay 280,000 within about 20-14 years, you would need about €1500 monthly. You need the same amount for the €180,000 if the interest rises to 9%. No one can predict if that will happen. If you can bear the risk, then choose option 1; if you have to sell the house after 15 years at €1500/month, then you need to choose another option.

That is my layman’s opinion... With such high loans, it’s always about risk assessment. No risk costs a lot of money, a high risk is initially rewarded with good conditions. If the interest rate remains stable at the current level over the next 15 years, you would be the winner with option 1.