Planning real estate financing correctly: From the desire to buy to the annuity loan - Calculate Now

Financing real estate, financing a house

Financing is one of the most important basics when building or buying a property and this should therefore be very well planned.

The purchase price of the property

The most important factor is of course the purchase price. This includes all costs that arise directly from the purchase of the property. If a developed property is purchased, additional renovation costs for the buildings and the outdoor facilities may arise.

Calculating the ancillary costs of the house

In all cases, the ancillary costs of the purchase must also be financed. These include

• Notary and court fees of 1-2% of the purchase price,

• the real estate transfer tax of 5% to 6% and

• if necessary, the brokerage fee.

As a rule, the land transfer tax is due immediately. So you should make sure that you have enough liquidity.

Financing requirements: can I afford a property at all?

From the total costs determined in this way, one subtracts the available equity capital and the value of one's own contributions, the so-called "muscle mortgage", and has thus determined one's financing requirements .

The financing was for private owners in former times a domain of the savings banks, people banks or other house banks. But since intermediaries have long been offering nationwide construction financing comparisons, people no longer have to rely on the few locally established banks.

Once one has deducted the self-financing from building society savings, bank balances, liquidable securities, the land or personal contributions from the total costs, the amount of external financing is known.

A loan to finance the outside share can be obtained from building societies, banks, the Kreditanstalt für Wiederaufbau (KfW), the state development institutes or insurance companies.

Alternative financing options

More rarely, private loans, for example from relatives or employee loans from the employer are also used for financing. In principle, in private real estate financing, the loans are secured by an entry in the land register.

The route to real estate financing, which used to be almost exclusively via local banks, is now increasingly via financial services brokers. The Internet is also becoming increasingly important as a sales channel for construction financing.

Tips for secure construction financing

• Term: Depending on your assessment of the development of the capital market, you should set the term. If you expect rising interest rates in the next few years, you should finance for a long term of 20 to 30 years. If you expect interest rates to fall, we recommend a short-term term of 5, 10 or 15 years.


• Interest rate: Only the effective interest rate is meaningful for the calculation of real estate financing. With a high income (> 100,000 EUR per year), higher interest rates can even be advantageous, since loan interest is tax deductible and thus reduces the taxable income.
  
• Repayment: The repayment rate is usually between 1% and 3%. High repayment rates shorten the term of the loan enormously and thus reduce the risk.


• Cash reserves: As with new construction, you should always have some additional liquidity ready. Pleasant side effect, this also calms the banks and you can possibly still get a half percentage point less in the financing.


• The financial advisor: Your bank advisor should in any case be on your "wavelength", otherwise later problems and misunderstandings are already pre-programmed.


• The right bank: Research a little on the net, which banks are just very credit-friendly. One receives this information to credit lenders often in press reports over discount interest actions and building forums.


• For the self-employed, other conditions apply, which we will discuss in detail elsewhere.

Appraisal of the property

Even if your first impression of a property is very positive, we strongly recommend that you look very closely or take a construction professional (building surveyor or civil engineer) with you when you visit the property.

For this purpose, it is also helpful to have a checklist that lists all the essential points that you should look at closely when viewing a property.

Real estate purchase checklist

There are many real estate purchase checklists offered on the Internet. Most of them are quite specific, such as "Buying Real Estate Abroad" or "Investing in Real Estate ". If you want to buy a property for private use, you are better off with a more general checklist. Here you will also find what costs are involved in construction financing.

These are the things you should look at carefully

Our list below can be worked through point by point during an inspection of the property. For the areas, of course, you need square meter - data, otherwise a multi-level assessment (zero to three stars or simply school grades) is sufficient for an initial overview. Below you will find more details on how the living space is calculated.

• Areas: To determine the total area, you need the size of all individual areas. These are basically the following: Floor areas, usable areas, balcony / loggia / terrace, sufficient area for determination of the rooms.

• Water supply + heating: gas, water, sewage, heating system, heating pipes, will radiators be warm (old radiators do not distribute heat well enough and are often designed too large).

• Electrical installations (building services): house connection, risers, electrical wiring and connections. Media connections antenna / satellite / cable, door opener / intercom / video. Ask for the maximum internet connection speed (in new building areas there are often very slow internet connections), enough sockets or distributors (in old buildings there are often too few)

• Roof + windows: roofing, roof tiles (high quality = clay, low quality = ceramic), thermal insulation, zinc sheets, gutters, downspouts, condition of beams / trusses, thermal insulation, multiple glazing, general condition, moisture damage to windows?

• Kitchen: tiles and joints, seals, appliances and connections, fittings, fixtures (electrical appliances not too old => high energy consumption), extractor fan (air extraction to the outside).

• Sanitary areas: Bathroom tiles not damaged, floor tiles tight (no mold damage), fixtures not rusted, toilet flush ok, water flow ok (no rusted pipes)

• Floors + walls: straight surfaces, floors not worn (e.g. parquet), floors everywhere on the same standard height (no raised rooms > landings), baseboards not too worn

• Cellar: no mold (no damp smell), stairs not cracked, cellar entered in building plan

• Outside facilities: parking space / garage

  Entrance area, garbage cans, garden, privacy screen, planting (no uncontrolled growth), no trees reaching into the neighbor's property, waterproofing of the paving available, roof terrace or conservatory building permit available, rainwater drains available for basement apartments

Our checklist is certainly no substitute for an expert's report, but it does make it clear what you should look at when inspecting a property. If one has assigned its points, then already a first picture becomes clear, which goes into a certain direction. Perhaps one has already decided against it.

In case of doubt about the information or lack of own expertise, one should consider the inspection with an expert companion. In particular the rough calculation of possible building reorganization costs, should be set by a building professional.

Parallel to this, it is advisable to find out for oneself in a relevant construction forum.

In general, using the checklist can quickly lead to an overview of everything that is important and to finding any weak points more quickly during the next inspection.

Pay attention when buying a house

You should also be sure to clarify the following points:

• Why is the property to be sold (become alert to the info that the seller wants to emigrate)?

• Take a look at the development plan and ask directly at the building authority if there will be building changes near the property in the future (roads). What about rights of way or other rights.

• Is it warmer than average in the rooms? Were the rooms painted shortly before? This often indicates a massive moisture problem (construction defect).

• Take a close look at the building encumbrances . Is the property handed over 100% free of encumbrances?

• Check the architect's plan, do you recognize areas that are not marked in the architect's plan (e.g. terraces on garages, projecting building parts to the neighboring property, extensions or similar)?

• Ask for an energy certificate as well as the last invoices from the energy supplier and check the consumption values. The energy certificate is now mandatory for the seller of a property.