Real estate financing: good planning essential

Berlin – Anyone who flirts with the purchase or construction of a property, should take time to determine the costs and find the right credit. Otherwise, there are bad surprises.

News / Finance

Picture: House made of Euro bills Image: © Franz Pfluegel / / Text: dpa / tmn

The times for builders or homebuyers are good. Because of the euro crisis, the interest rates on construction loans remain record-breaking low. According to the Federal Association of German Banks, around 3 percent had to pay customers in July 2012 for a loan of 100,000 euros with a term of ten years. The dream of a home is within reach. However, future real estate owners need to calculate soberly for sound financing.

Before buyers or builders even start to look at the real estate offers or look for suitable land, they should set their own financial framework. The key question: how much money do I get myself, how much money do I have to borrow from a bank? The rule is: Without equity, nothing works.

The more equity, the better

“At least 20 percent equity would be nice,” says Heike Nicodemus of Stiftung Warentest. “But the more equity the better, because that makes the interest rate on the loan cheaper.” Therefore, it might also be advisable to liquidate investments – except for a security reserve. Because banks are more generous, if they do not have to lend the property to the last tile.

In addition to the price of the property but still other costs must be considered. For example, a land transfer tax applies. Depending on the state, this is between 3.5 and 5.0 percent. Also, the land register entry costs money. 0.5 percent of the purchase sum is due. The notary who accompanies the purchase of real estate must also be paid. He gets between 1 to 1.5 percent. For a property that costs 300,000 euros, the additional costs quickly add up to 21,000 euros.

“That’s the price for a midsize car that comes together,” says Eva Reinhold-Postina of the Association of Private Builders. She advises therefore, not to short of calculating. Otherwise unforeseen expenses can quickly shake up the financing. “The best is still liquid, if you have already paid for the property.” The customer review has been automatically translated from German. About 10 percent of the total volume should be left over after purchase. Heike Nicodemus of Stiftung Warentest recommends at least three net monthly salaries as a reserve.

Services of a credit intermediary

Is the budget, you have to take care of a corresponding loan. Heike Nicodemus advises first to contact a credit intermediary. “They work together with many banks and find suitable offers through appropriate questions.” Then customers should inquire at the small, regional banks. With these offers under the arm, customers should then go to their house bank.

Important for all offers: “Compare the annual percentage rate at various banks,” says Stephan Mietke of the Federal Association of German banks. In addition to the nominal interest rate, the effective interest rate takes into account, for example, processing fees as well as the interest and principal settlement on the credit account.

How the loan should be designed depends strongly on the personal life situation. “The monthly burdens should not exceed 30 to 40 percent of net family income,” advises Eva Reinhold-Postina of the Association of Private Builders. “In this net family income reserves should be deducted for old age already.”

Do not set the eradication too low

The repayment, ie the repayment of the loan, customers should not set too low. “In the current low-interest phase, the repayment rate should be 2 to 3 percent,” says Mietke. “Who repays only 1 percent, which should have special repayment possibilities, otherwise the credit runs too long.” In the case of a special repayment loan, borrowers can make additional payments in addition to installment payments in order to reduce the loan more quickly if there is more money than usual.

Since interest rates are historically low, they should be fixed as long as possible. Usual is a period of 10 years. “However, we should aim for 15 years,” says Heike Nicodemus of Stiftung Warentest. However, a longer fixed interest rate costs a small premium.

Use KfW loans

Homebuyers should also try to use state subsidies. If you build, refurbish or modernize your property in a climate-friendly way, KfW offers low-interest loans and subsidies. It’s worth it, but you should be well informed. “The promotional loans have strict conditions,” explains Eva Reinhold-Postina.

Who has considered all these points, can realize the dream of their own property. Because one thing is certain: the financing stands on a solid foundation.