Real Estate – “Finanztest”: 5 Tips for Home Financing – Economics

Berlin (dpa / tmn) – Is the dream of owning a house breaking? Constantly galloping real estate prices coupled with rising interest rates are causing problems for many people who want to build. Meanwhile, the interest rate on loans with a ten-year fixed rate almost always exceeds three percent. This is evidenced by the evaluation of the magazine “Finanztest” (issue 8/2022).

The testers’ example shows what this means in detail: a house that was available for 400,000 euros at the beginning of last year now costs 460,000 euros. Including 10% of the additional purchase costs, the purchase price is € 506,000. Anyone who has saved EUR 100,000 in equity needs a loan of EUR 406,000, which is EUR 66,000 more than in the previous year. Moreover, with a 15-year fixed interest rate, the loan is no longer available at 1.1%, but at 3.5%. per year.

If you want to be free of debt in 30 years, according to the calculations of the “Finanztest” you have to transfer an installment of EUR 1,820 to the bank every month. That’s a good € 710, or 64 percent more than what would have been necessary to finance a home in early 2021. Thanks to the drastically increased costs of electricity and heating, several hundred euros are added to the current additional costs.

How much real estate can I afford?

If you want to know how much real estate you can afford with your assets and income under current conditions, you can use the home financing calculator from Stiftung Warentest.

According to the trade journal, the current situation means that buying has become cheaper than renting. In the past three years alone, property prices have risen by more than 30 percent, while new contract rents have increased by only ten percent over the same period. Especially in large cities, condominiums currently cost more than 30 times the annual rent for a comparable flat for rent. In Berlin, even more than 40 times that.

Finanztest advises you to pay attention to an appropriate purchase price / rent ratio for comparable apartments. If the purchase price corresponds to more than 30 annual rentals, it should only be accepted in exceptional cases. Those interested can also use the Stiftung Warentest calculator to check online whether it is worth buying compared to renting.

Location is the deciding factor in the price

In any case, location plays a key role in prices. “Finanztest” refers to data from the Association of German Banks, Pfandbrief (vdp), which estimates the figures for 350,000 real estate sales each year. The result: while in Magdeburg a 130 square meter detached house in a good location and amenities is available for 300,000 euros, in Mainz there is only a 70 square meter two bedroom apartment for this price. In Munich, the money is enough only for a student excavation of 30 square meters.

Those who are not deterred by price and interest rate changes should consider five Finanztest tips for financing your own home:

1. Equity: You should be able to meet all ancillary costs and at least ten percent of the purchase price and preferably 20 percent from your own resources. The capital should be used with the exception of the three-month salary reserve.

2. Fixed rate: Only a long fixed rate protects against further increases in interest rates. If you can’t pay more than 3% at first, you should have interest set for 15 or 20 years.

3. Amortization: A minimum of 2% initial amortization is required to pay off the loan within 30 years or less. Be careful not to combine a one percent repayment with a short fixed interest rate of five or ten years. If interest rates continue to rise, the financing of residual debt is quickly at risk.

4. Options: If your income or assets change in terms of your property financing, repayment options can help. Special rights to repay up to five percent of the loan amount per year are common. According to “Finanztest”, most banks also propose to increase or decrease the repayment dates.

5. Comparison: Get different loan offers. Even a few percentage points of advantage in interest rates can quickly save a five-digit amount over the period of validity.

© dpa-infocom, dpa: 220711-99-982808 / 4

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