Small differences, big impact: If you pay attention to the interest rate on the property loan, you can save tens of thousands of euros. But the repayment definitely plays a part in the total costs and term.
Bremen – If you carefully compare the offers of banks when buying a condominium or house, you can save several thousand euros on finance. Because over a long period of time, usually several decades, even a few percentage points behind the decimal point of the effective annual interest rate adds up. It also makes a lot of difference to pay it off quickly and thus keep the term short. The sooner the loan is paid off, the less interest you will incur in total. The question arises: How much can the differences in the boundaries make?
Finding the right balance between interest rate, repayment rate and term is not that easy. “Many customers are driven by the monthly rate they can afford,” says Roland Stecher, financial expert at the Bremen Customer Center. “We recommend not spending more than 30 percent of your net income on a real estate loan.” However, the interest rate can make a difference of thousands of euros if this monthly rate pays most of the interest at the bank or if it pays back that much. of the loan as possible.
According to the current property interest comparison from the magazine “Finanztest” (9/2024), construction interest rates currently start at around 3.2 percent for 80 percent financing with a fixed interest rate 10 years. Depending on the provider, interest rates can also rise to 4 percent. “That’s moderate, but actually high compared to the absolutely low interest rate of a few years ago,” said consumer lawyer Stecher. “In addition, real estate prices are rising, so developers need high loans.”
Example calculations show the effects
Sebastian Schick, editor-in-chief of the financial platform biallo.de, recommends that interested parties first check the conditions at their own bank and, in the second step, talk to a bank online. “If you then get the conditions from an independent credit broker, you can get an overview of the current values,” Schick said.
“In order to be able to compare the situation of the banks, you have to get offers in which the term, the monthly rate and the repayment conditions are the same,” says Max Herbst from FMH-Finanzberatung. “Otherwise you lose track of things.”
Several examples of calculations prepared by Herbst show how much even small interest differences add up in the end: A customer pays a monthly installment of 1,806.67 euros for a loan of 400,000 euros. With a loan rate of 3.42 percent and a repayment rate of 2 percent, he paid 121,577 euros in interest after 10 years of fixed interest rates. The loan will be repaid with 95,223 euros by then. The remaining debt is 304,777 euros. If the financing continues under the same conditions after ten years of fixed interest rates, the builder would need 29 years and 3 months to pay off the loan in full. He pays a total of 232,883 euros in interest.
You must be able to afford higher repayments
If he takes out a loan of 400,000 euros at the same monthly rate of 1,806.67 euros at an interest rate of 3.52 percent – i.e. just a tenth of a percentage point more – he can only pay 1.90 percent back. Here the interest over the entire term would be 246,588 euros, which is 13,705 euros higher. The builder also needs seven months longer to pay the total amount than in the example with the cheaper interest rate of 3.42 percent, ie 29 years and 10 months.
It may also make sense to accept a higher monthly payment for a higher repayment. Anyone who finances the loan of 400,000 euros with an initial interest rate of 3.42 percent and repays at 2.3 percent will have to pay a slightly higher monthly rate of 1,906.67 euros, i.e. only 100 euros more than in the two examples before. He only needs 26 years and 9 months to do this and will pay 210,372 euros in interest over the entire term. This means that the interest burden is 22,511 euros less than with the two percent repayment under the same conditions – and the loan is paid back. two and a half years earlier. “But the rate is also higher, you have to be able to afford it,” Herbst said.
There should be a repayment rate of two percent
The repayment shouldn’t be set too low from the start. “In the current interest rate environment, it should be a 2 percent repayment rate; 2.5 to 3 percent would be better,” says Sebastian Schick. However, many builders would reduce their repayment rate if interest rates rise after the fixed rate so that the monthly rate remains the same. But this is clearly evident in the term and interest payments.
The lower the repayment rate, the longer it will take to pay off the loan in full. “The term of the loan can double,” says Roland Stecher. But speed isn’t everything, the consumer advocate says – because as the repayment increases, so does the monthly burden. If you put every cent into the monthly payment, you will have less money to live on – and that is not the right way for everyone.
In addition to comparing interest rates and repayments, it is important to keep the financing as flexible as possible. “Customers should only accept offers that give them a specific repayment right at no cost,” says Sebastian Schick. The ability to change the repayment level if necessary is also an important criterion. “This allows the customer to deal with possible changes in their financial situation during the term.”
For example, he can then pay a larger amount in one lump sum each year, for example after a life insurance policy is paid out or if there is an inheritance. On the other hand, of course the repayment rate can also be reduced for a lower monthly payment if things become financially tight. dpa
2024-09-01 22:21:01
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