Which financing option to choose?

Hello everyone,

my girlfriend and I will soon fulfill our dream of owning a home. Now it’s about financing, and we have already obtained several offers and are now hesitating between the following options.

A brief overview of the conditions:
Income hers: approx. €2300 / age 29
Income his: approx. €2700 + 13th salary / age 34
Plot of land (value approx. €102,000) is already available
Cash assets: €30,000
No children yet, but there is a desire for them

Option 1: (Our favorite)

Commerzbank interest-only loan: 1.61% / 1.74%
Loan amount: €355,000
Fixed interest period 12 years
Monthly installment: €476.29

BHW home savings after allocation 2.35% / 2.52%
Savings contribution: €951
Saving phase: 12 years
Balance upon allocation: €133,811.72
Repayment phase: 15 years
Total duration: 27 years

Monthly total installment: €1427.29 // €1450

Option 2:

Alte Leipziger interest-only loan: 1.8% / 1.91%
Loan amount: €355,000
Fixed interest period 15 years
Monthly installment: €532.50

Alte Leipziger home savings after allocation 1.45% / 1.64%
Savings contribution: €902
Saving phase: 15 years
Balance upon allocation: €160,009.38
Repayment phase: 11 years
Total duration: 26 years

Monthly total installment: €1434.50 // €1518.11

Option 3: (also not bad because of flexibility?)
Pure annuity loan ERGO
Interest 2.31% / 2.35%
Monthly installment €1372.67
Loan amount: €355,000
Fixed interest period: 30 years (remaining debt after expiry = €0)

The borrower has the right to change the repayment rate twice during the fixed interest period between 1% and 4% p.a. without a separate processing fee being charged. Further changes to the repayment rate (within the aforementioned range) are possible against a flat fee of €100. In addition to regulation K 1 of the general loan conditions, a non-utilization fee will be waived if the unused loan amount does not exceed 10% of the contractually agreed total loan amount, maximum €20,000.

We had actually set a monthly installment of €1400 as a guideline and so far favor option 1. However, we find the flexibility of option 3 interesting.

What would you advise? And is the monthly installment possibly set way too high?
According to our calculations, it should actually be fine...

We would be very grateful for your constructive advice.

Clearly 3! You won’t get more flexibility! If the burden with children fits, then the rate fits too.

Otherwise, you can increase the repayment at 3 and make special repayments.

Have you already put all the models in Excel and calculated what interest burden comes out? (so apple to apple what I pay in principal + what interest)

I really can't understand it... always the same thing. Why should apples be compared to pears here? Building society savings contracts, interest-only loans, etc.

Why commit to 30 years with an interest surcharge of 0.4% or choose an interest-only loan? Why? You pay interest for 12 years and haven't repaid a cent. If you didn't have enough equity and income, I might be able to understand this!

So where is the problem in setting up proper financing? Why do you favor option 1? Have you understood the disadvantages of this option?

Don't make it so difficult for yourself....
With a loan-to-value ratio (under 80%) you get an interest rate of 1.92% for 20 years, with 3% repayment the monthly rate is €1450. After 20 years you only have a residual debt of €95k. Based on your income, you have over €3k left per month to live on (after deducting rate/incidental costs).
If you then make additional repayments of €4-5k annually, you will be done after 20 years and have no residual debt, thus also be finished under 50.

Don't make it so hard for yourself.... With the loan-to-value ratio (under 80%), you get an interest rate of 1.92% for 20 years, with 3% repayment the rate is €1450 monthly. After 20 years, you only have a remaining debt of €95k. Due to your income, you have over €3k monthly left to live on (after deducting the rate/additional costs). If you then make extra repayments of €4-5k annually, you will be done after 20 years and have no remaining debt, thus finished under 50.

I would also lean towards this option 4 from . The €95k in 20 years are really very manageable if you actually still have it then.

I really can't understand it...

Because every year I receive money from the state as a gift, consistently use it for repayment, can make unlimited special repayments in the second phase, pay less interest overall, have paid everything off significantly earlier as a result, and then (while others are still repaying) save the money for the one-time payment Wohnriester. Overall, the most cost-effective option for me.

Because I receive money from the state as a gift every year, consistently use it for repayment, can make unlimited special repayments in the second phase, pay less interest overall, have paid off everything significantly earlier as a result, and then (while others are still paying off) save money for the one-time payment of Wohnriester. Overall the cheapest option for me.

What gift? The Baukindergeld? Tax refunds are only retrospective. In other words, you are financing the state interest-free. But I can’t say it often enough. A special repayment is very, very, very often suspended because something happens in the calendar year. That’s how it is.