Your opinion on the financing offer

Hello,

we have found our little house and are currently comparing financing offers.
Below is an offer we received today.
I would appreciate your assessment!

First, a few details about our family/financial situation:
My husband and I are 33 years old, we had our second child in June.
Actually, we had planned our desired rate to be between 1,000 and 1,100 euros.
However, until 2017 we are somewhat financially restricted (loss of income due to parental allowance, then high childcare costs for child 2, etc.). Therefore, we didn't want to calculate too tightly during this period.

The advisor has now presented the following proposal:

Purchase price including ancillary costs: 347,000 euros
Equity: 62,000 euros
Loan amount: 285,000 euros
Interest fixed for: 10 years
Effective annual interest rate: 2.01%
Repayment rate: 1.65%
Monthly rate: 864.50 euros
Remaining debt after 10 years: approx. 233,000 euros.

To limit the interest rate risk afterwards, simultaneously conclude a building savings contract over 100,000 euros, pay in 30,000 euros in 10 years (would be 250 euros monthly. But it can be saved flexibly).
-> after the fixed interest period, use the 100,000 euros as a special repayment. These will then be financed at approx. 2.5%. Interest rate risk thus "only" exists for the remaining 133,000 euros.

I am still a bit skeptical whether this is such a good offer…
What do you think??

The loan conditions appear to be market-appropriate. However, in my opinion, the repayment rate is too low; the parallel savings in the [Bausparvertrag] is only a small consolation. You should repay at least 2%.

Who advised you to save 30,000 euros in the [Bausparvertrag]? That person should be tarred and feathered. That will backfire or end in interim financing with extra costs.

You need to save at least 40,000 euros so that the [Bausparvertrag] becomes due for allocation on time. Otherwise, you will end up losing money. (The 40% applies in most [Bausparvertrag] contracts. Exceptions prove the rule)

Can you adjust the repayment rate in a few years? Then you should do that, but I already predict that you will not, because other priorities will arise.

You have not yet understood the [Bausparvertrag] construct.

I would rather fix the term at 15 years. Maybe even 20 years.

The problem is that you have a rate of 1200€ per month (850 loan and 250 home savings contract). I would rather put the money directly into the loan.

After 10 years, you basically have 5 years to find a suitable follow-up loan. Since you can cancel at any time after 10 years.

I would be skeptical about the home savings contract. You still have 133,000 plus the 70,000 outstanding. That would be 207,000 euros in debt. The home savings contract also has to be paid off after 10 years.

If you service the loan directly with 1200 euros, you would "only" have 189,000 left. That's basically 27,000 euros that you have repaid more.

But these are all just calculations.

I would be skeptical about the building savings contract. You still have 133,000 plus the 70,000 outstanding. That would be 207,000 euros in debt. The building savings contract also has to be repaid after 10 years. .

What interest rate is applicable for the building savings contract? Do you have 2% or already 4% for the 70,000 €? I would advise you to choose a longer fixed interest period, especially with 2 children a lot can happen.

Hello,

I consider it reckless to conclude only 10 years and to include such a low repayment. A 2,xx is a must. Better to abstain for 2 years because of daycare costs and then go on vacation from the 3rd year. For that, repay reasonably from the beginning.

15 to 20 years are a must. Haven't you consulted any intermediaries?

The duration of the fixed interest period is NOT a must, even though it is repeatedly promoted here!

It is solely due to one's own risk tolerance, risk capacity, and interest rate expectations that one decides which fixed interest period to choose.

The guaranteed additional costs of the first years for a longer fixed interest period must first be recouped in the following years through significantly increased interest rates.

And I do not see this as given, at least for the next 10 years. However, this represents my own risk-weighted opinion.