Which financing option should I choose?

Good morning everyone,


I would very much like to hear from you how you assess the financing options.


Regarding the starting situation:


Me, 31, employee with €3174 net income, tax class 4, after deducting €40 for capital-forming savings and about €50 net for company pension scheme.


Her, 32, trainee teacher in the education service, civil servant with about €1560 net income, tax class 4. The traineeship lasts until 31.12.18 and at the moment she has an oral promise to transition her current school into a permanent employment relationship. Then as a civil servant as well. The school only advertises the position when she finishes her traineeship, despite needing staff. Income then about €3200 net.


1 child, about 1.5 years old


Expenses:


Warm rent: €780

Electricity: €60

TV, Internet: €40

Mobile phone: €40

Garage: €40

Daycare: €250

2 cars: €200

Disability insurance, accident insurance for me: €100

Food: €600

Fuel: €300

Private health insurance for her: €96


These are roughly the expenses for now.


Existing capital:


Equity: €20,000

Building savings contract 1: savings amount = €10,000, of which €4,000 is saved and waiting for allocation, interest rate: 1.95%

Building savings contract 2: savings amount = €25,000, about €3,500 saved, here the interest rate for the loan part is also 1.95%


Plot of land: €6,384 please don’t laugh, already fully paid from own funds including incidental costs. The plot is about 913 sqm large and currently has a land value of €11.


There is still a building on the plot which will be demolished next week for €6,000. The capital used for this is available and will not be covered from the equity.


Further capital would be about €8,000 in a daily money account but this should not be included. Another €7,000 is invested in a savings book which serves as an absolute emergency reserve.


Construction project:


Construction price including own work (painting plus floor coverings): €322,920

Outdoor facilities: €23,000

Additional construction costs: €18,300

Plot price: €6,384

Real estate transfer tax: €319

Notary fees: €1,128


Minus used capital


Required loan €333,200


With all these data I was at Dr. Klein and got the following two offers:


One thing upfront, since my wife only has an oral promise, I have chosen the installment so that I could pay it alone from my salary, so it is initially low. Desired installment without additional costs is €1700 to pay off the house quickly.


Option 1:


Loan 1: Full repayment loan at Ing-Diba of €150,000 over 20 years


Interest rate 2.25% at €781.25, no special repayment and no repayment adjustment


Loan 2: Loan at Ing-Diba of €183,300 over 15 years


Interest rate 2.10% at €473.53, 5% special repayment and 2x free repayment adjustment

Remaining debt after 15 years €151,000


In my view, this option provides relatively good flexibility. If everything runs according to plan, I would increase the installment for the second loan to about €780, which corresponds to 3.5% repayment. Then the remaining debt after 15 years would be about €86,000. However, if a second child comes or something else happens, I am relatively flexible.


Option 2:


Loan 1: Loan at KFW (124) of €50,000 over 10 years


Interest rate 1.55% at €208, no special repayment and no repayment adjustment


Remaining debt after interest rate fixation about €32,000


Loan 2: Loan at Ing-Diba of €283,300 over 15 years


Interest rate 1.99% at €469.81, 5% special repayment and no repayment adjustment


Loan 3: Building savings contract at BHW of €283,300 over a total of 31 years


Interest rate 2.35% at €547 in the saving phase (15 years) and €1,142 in the repayment phase


Here the monthly burden is altogether €1,224, but after 31 years I am definitely done and in this option I have not made a single euro of special repayment. I would refinance the remaining debt from the KFW loan with the €25,000 building savings contract if the KFW does not offer me a better interest rate.

If everything runs according to plan here as well, a certain amount x will be transferred monthly to a separate account for special payments to finish significantly faster. I know this option requires much more discipline.


The €10,000 building saver is to be used for the kitchen.


Well, now my fingers are sore and I would very much like to hear your opinion. Many thanks in advance.


Regards

Hello,

those are excellent incomes in SA....

Desired rate 1,700 without additional costs but both variants are 300-400 € lower there. Why is that?

I also see modules there without any repayment in the annuity. What is the idea behind that?

If you trust yourselves with 1,700 then you should do that and get used to the rate. 15 years fixed interest period and the matter is settled.

Without KfW and building society savings contract

Hello,

Since my wife only has a verbal commitment, this does not count as a commitment for me. The probability of not getting an employment contract as a teacher is currently very low but still there. I also don't know how the bank views the current income and the desired rate.

Therefore, I wanted to play it safe with the current rate and then increase the repayment or the special payments once the position is secured.

Regards

Hello, A few spontaneous thoughts about your post: The loan-to-value ratio is quite high. How long will the allocation of the first building savings contract still take approximately? Do you absolutely want to build immediately now, or would waiting 9-12 months also be an option? Advantages would be, 1. that the transfer to your wife would be clarified 2. your building savings contract (10,000) might be ready for allocation, and with that you could lower the loan-to-value ratio —> Possibly better interest rate! 3. in the meantime, you could accumulate more equity. About 900€ per month (if I roughly calculated your numbers correctly) I think it’s good to keep a safety cushion! We did the same. But I would also get individual advice from the house bank in parallel. Maybe 3000€ from the savings account as invested equity could exactly make the next step for a lower loan-to-value ratio. You can repay a lot, since there is a high family income available or will be available with the transfer to your wife. Also have them offer you a fixed 10-year rate just for reference. At 1700€ per month (option 1), you will have paid off maybe half after 10 years (I haven’t actually calculated it). There’s no need to fear a higher interest rate, since your loan-to-value ratio at the follow-up financing is low. Whether to choose an “expensive” “start-to-finish” financing depends on each individual. Good luck and congratulations on the cheap plot! Where do you find such a thing? *I envy you a bit*

So the property is located between Oschersleben and Halberstadt and has 600-700 inhabitants. I grew up there and we actually want to start in the fall. At that time, the takeover will probably already be confirmed. However, we need to secure the financing beforehand.

Well, the house bank is Ing-Diba. Therefore, probably not much will come from there. Dr. Klein also said that the next interest rate jump is still very far away.

Last week I increased the €10,000 building savings contract to €4,000. The contract was signed at the beginning of 2008.

The daycare place in the town is already reserved from May/June next year.

I will get in touch with Dr. Klein again.

Oh yes, the savings book is a premium savings book where we now reach the high percentage range. We get 50 percent of the deposited capital, and that’s at least €300 interest. We really want to use it only in an absolute emergency.

So the property is located between Oschersleben and Halberstadt and has 600-700 inhabitants. I grew up there and we actually want to start in the fall. By that time, the takeover will probably already be confirmed. However, we need to secure the financing beforehand.

Well, the main bank is Ing-Diba. So probably not much will come from there. Dr. Klein also said that the next interest rate jump is very far away.

Last week, I increased the €10,000 home savings contract to €4,000. The contract was concluded at the beginning of 2008.

The daycare spot in town is already reserved from May/June of next year.

I will get in touch with Dr. Klein again.

Oh yes, the savings book is a premium savings book where we are now entering the high percentage range. We get 50 percent of the paid-in capital and that is at least €300 interest. We really only want to touch that in an absolute emergency.

I would continue to save into the savings book if the interest rate is good and you don’t need the money.

Keep an eye on the child building grant (Baukindergeld). I don’t know if your wife becomes a civil servant whether you will then be above the income limit. That’s why you should lock it in now. )=