Is it the right time to buy a house or apartment for your own use?
The time to buy a property is cheaper than ever. At least at first glance it seems that way. Rents are rising steadily and for low interest rates you can now get a great real estate loan offer from the bank, for a house or a condominium. But real estate and land prices have risen in many regions. Even in times of low interest rates, only those who have a secure income and at least 20-30 percent equity for the total costs should think about real estate financing. The more equity that can be used to finance the property, the cheaper the interest rate for real estate financing. If you still have very little or no equity capital for your real estate financing, first find out about worthwhile money investments, for example with the investment calculator. Or create an additional income, become a private lender and earn money by lending to private individuals.
The financial experts advise against the so-called full financing (financing without equity), which has led to the real estate bubble in other countries such as the USA.
Where can I get a cheap loan for my private real estate financing?
You can get money for your real estate financing from banks, building societies, promotional institutes, insurance companies, private individuals, employee loans from employers.
Inquire whether government grants, such as residential residences, or funding programs from the state-owned KfW bank can also be used.
An online real estate loan comparison calculator is useful for comparing various financing offers such as interest and repayment. So you can plan in advance how much money is needed to repay the financing.
Here you can determine the costs of real estate acquisition such as interest on loans (real estate loan calculator).
The disadvantages of a privately used property to be financed
- Repay 20 – 30 years of credit – inflexible (change of job, separation from partner, loss of job, illness)
- Loss of value – after approx. 20-30 years (worn out, lower resale value, unless TOP location – forecast very difficult)
- Reserves form renovations and modernization for later maintenance (roof heating)
- Interest rate risk after fixed interest rate (e.g. 10 years, then new fixed interest rate)
- a home in a poor location is difficult to rent or sell
- higher additional costs (energy, insurance) than with a rented apartment
- Overestimation of own contribution (muscle mortgage) possible with new building
- additional rent charge possible if the new building is not completed on time
- only small tax savings (craftsman services can be deducted from the tax to a small extent)
- in the case of a family home – usually a greater distance from the workplace (commute – traffic jam, more petrol costs, risk of accident, purchase of a car or second car)
- Individual conversions are only possible to a limited extent in the condominium
- Condominium also means being bound by the requirements of the community of owners
- Family planning – existing, planned or unplanned offspring costs a lot of money – childcare, maintenance, consumption – expenditure (need) increases with the age of the child
- Risk of over-indebtedness across generations
Advantages of own property (for private self-use)
- the costs (credit rate) of long-term financing remain constant, while rents increase
- more design options than with a rented apartment
- Space and space for the family – own garden, garage, carport, hobby room
- Retirement provision – once the loan has been paid off, an additional sum of money is available every month
- A property is a real asset – in contrast to shares or savings accounts
Before real estate financing, you should go through all possible scenarios. In order to determine the amount of a credit installment, a comparison of the current income and expenditure is absolutely necessary. A household book helps to keep the financial overview.
If you have enough saved equity and a secure income, that’s half the battle.
Discuss and plan the financial implementation with a competent advisor. This is how you find an affordable financing offer that is tailored to your own needs.
You are welcome to tell us more advantages and disadvantages of buying or renting real estate.