Your opinion: Is TEUR 370 financing feasible?

Good morning,

here you can see as the best example that qualified advice at a good bank is absolutely necessary.
In principle, I agree with you. We had the following financing options on the table: annuity loan, standard building savings contract, and building savings contract with Riester.

The standard building savings contract was the most expensive.
The annuity loan followed, with the (for me) biggest drawback, a term of 25 years and then another 5 years with a fictitiously calculated 6%. The bank did not want to fix the interest rate for more than 25 years.
The Riester building savings contract was the cheapest including the deferred taxation.

I also had the following requirements, which I absolutely did not want to deviate from and which were only met with the Riester contract:

max payment €1500
max term 25 years including 100% repayment.
Now the payment has increased slightly, but with it, I was able to "cancel" my normal Riester savings plan, which a) gave me better financial flexibility and b) increased my equity by €10,000.

Due to the term (exactly now 24 years and something between >5 and <12 months), I have 12 years until retirement to save for the deferred taxation, which with a net rate of 42% amounts to approx. €17,500, so after the house is paid off €112 per month without interest effects, whether the tax rate will really be 42% is another matter. I calculated with the current worst case. Of course, my current tax allowance of €154 ("still" no children) and €770 (taxes) (for approx. 37–38 years) must be offset here, which makes a total of about €35,000.
Especially the tax refund is very worthwhile with a higher income.
If you are married, there is double the allowance with joint assessment --> but I am not exactly informed here, I may be mistaken.

If I were not financing such a huge amount, I would probably have decided on a 15-year annuity loan with high repayment, but with this amount I do not do that.
And personally, I can only advise everyone in the current interest rate situation to find a bank that fully finances the project 100% right away, even if it gets a bit expensive. So what --> my parents had to pay 13%.

By the way:
I have an 850m² plot, a stepped floor with 171m², and good equipment and pay about €650 in interest monthly over the years. As rent, I would easily spend twice that. Adjusted for inflation, it's almost free.

Best regards

In the end, it depends on whether you can afford it, have a clear conscience, and above all, the loan is "transparent."

We have taken into account the amount of deferred taxation and were still more favorable in the entire interest volume than with a normal loan.

Why the interest rate on the Riester home savings contract is lower than other types of loans, I cannot explain.
So far, I have not seen an annuity loan with a 25-year term at 2.8% anywhere.

You should already include the deferred taxation at this interest rate (it is difficult to calculate), otherwise you cannot really compare the interest rates...

Hello

yes, there are rarely fixed interest rates for over 20 years. After that, fictitious rates are applied. But since you should start with 2% repayment, you are already looking at a 30-year term. Then add special repayments and you quickly end up with a total term of less than 20 years.

And yes, fictitious rates are also applied in taxation. There is also no guarantee that the tax burden will be as assumed....

I have above a vague statement regarding the downstream taxation.
My payable burden should be around 21,000€.

Otherwise, it is quite easy to calculate.

As an example for calculating the fictitious housing support account (by the way, the state calculates with a 2% interest effect on the account)

Duration until retirement 38 years
Contributions to the housing support account 154€ + 770€ = 924€ annually plus 2%

Result of the housing support account approx. 53,000€ at retirement.
In advance, I decided to pay the tax burden in a lump sum --> less 30%
53,000 * 70% = 37,100 less personal tax rate, worst case 42%
37,100 * 42% = 15,582€ tax burden

Correct me if I am wrong.

Hello

yes, there are rarely fixed rates for more than 20 years. After that, fictitious rates are applied. But since you should start with 2% repayment, you are already at a 30-year term. Then add special repayments and you quickly fall under a total term of 20 years.

And yes, fictitious rates are also applied in taxation. There you also have no guarantee that the tax burden will actually apply as assumed....

Well, should you count on special repayments from the start?
Personally, I find that too vague.

It would be interesting to know how you factor in the other risks of Riester. Simply selling the house or renting it out without having to repay the subsidies is then no longer possible. For me, additional retirement provision through Riester is by far safer.