Tip 1: Determine how high your real estate loan can be
In order to correctly estimate how much house you can afford, you should first do an honest checkout. To plan the monthly installment for your real estate loan, list all income and expenses in detail. Don’t include extra salaries or bonuses so you always have a financial buffer for the unexpected. Also think about how much equity you can put into the financing. In the best case, this is at least 20% of the total.
In addition to the credit installment, regular expenses include, for example:
- Cost of living (including food, clothing, drugstore items)
- Incidental housing costs (including electricity, heating, water, sewage, waste)
- Insurance costs (including household items, liability, provisions)
- Car / public transportation costs
Do not restrict yourself financially too much with a monthly rate that is too high. When calculating expenses, think about your usual standard of living: Would you like to be able to afford vacation trips while paying off the real estate loan? Also ask yourself the maximum rate that you can get if your earnings decrease, for example if you lose a second income. As a rule of thumb, the monthly loan rate plus incidental housing costs should not exceed 40% of your net income.
Tip 2: Pay attention to a free provision time for the real estate loan
Banks charge a fee if they provide you with a real estate loan but you do not access the money or only draw part of it. This fee is the so-called commitment interest. If you finance a new building with your loan, so if it is a building loan, you do not need the total amount at once. Instead, you gradually pay for each finished construction phase.
However, since the bank reserves the entire amount for you from the start, it cannot use the money in any other way. For this, she asks a fee of usually 3% per year on the amount not yet called. You can avoid this fee by choosing a loan offer including sufficient free provision time. This period varies from provider to provider between 3 and 12 months.
Tip 3: Agree a higher repayment if the building interest is low
How quickly you paid off your real estate loan depends on the amount of the repayment rate. This determines the amount of the monthly installment at which you gradually repay the loan. It consists of a redemption component and an interest component. With the repayment component you pay off your loan, the interest component is the bank’s fee for the loan.
The cheaper the interest rate that the bank grants you, the lower the interest portion of the installment and the more remains for the repayment portion. With a high repayment rate, you repay the loan much faster. We therefore recommend repayment of more than 2% at low building rates, since you can reduce the mountain of debt more quickly with less costs. With our repayment calculator you can easily find out how different repayments affect your monthly installment.
Tip 4: Stay flexible with free special repayments
Pay attention to the possibility of being able to make special repayments in the conditions of your real estate loan. This means that you can repay part of the loan – usually a maximum of 5% of the total amount – in one fell swoop during the term. You can use this option, for example, if you expect a high tax repayment or a partial payment of a life insurance. So you pay off the real estate loan faster and are more debt-free.
Tip 5: Find the right borrowing rate for your real estate loan
The interest rate valid when the loan contract is concluded applies to the entire term, the so-called debit interest rate. The following applies: the longer the term, the higher the interest rate. Because banks can pay long fixed interest rates through higher interest rates. But especially when interest rates are low, you don’t have to worry about rising construction rates with long interest rates – from 15 years of age. In times of low interest rates, we therefore advise you to keep the borrowing rate fixed for a long time, as this way you can secure a low interest rate for a long period.
Conversely, this means that if building rates are at a high level, a short rate fix is recommended. Because there is a chance that after the end of the fixed interest period, the building interest rate will have dropped and you can conclude cheaper follow-up financing.
Tip 6: Take into account all costs incurred in the construction financing
If you build a house or buy an apartment or an existing property, you will incur more costs than the pure purchase price. Overall, the incidental costs can add up to 15% of the total. The resulting cost factors include, for example:
- the notarized certification of the purchase contract (approx. 1.5% of the purchase price)
- the land register entry (approx. 1.5% of the purchase price)
- real estate transfer tax (3.5–6.5% of the purchase price, depending on the state)
- the broker, if he brokered the property (5.95–7.14% of the purchase price, depending on the state)
Also keep in mind that the move to your new home is coming up and you may still need renovation work or a new kitchen. These factors also have their price, and so there are additional costs that you should not forget in your calculation.
Tip 7: Compare several home finance offers with each other
The same applies to building finance as to other products: comparison makes you rich. Just a few percentage points difference in the interest rate can reduce the cost of a real estate loan by a few thousand euros. It is therefore essential to compare several offers with one another in order to find the optimal construction finance. A construction money comparison on the Internet offers you all active providers at a glance.
Take the time to compare the conditions and special services. Let various providers create financing offers so that you have a market overview and are well prepared to start a financing discussion. How to find the optimal strategy for your real estate financing, we will tell you in our guide on house financing.