Building interest rates have more than doubled since the beginning of the year
Krawczyk’s story is an example of what many people who want to buy a house or apartment in Germany are currently experiencing. While prospective owners were often just able to afford the high real estate prices thanks to low interest rates, the dream of owning a home is now threatening to be shattered for many. Fewer and fewer Germans can handle the double burden of rising interest rates and construction costs.
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Figures from Germany’s largest broker for real estate loans, Interhyp, show how much the situation has deteriorated. Accordingly, interest rates on ten-year loans have more than doubled since the beginning of the year: from an average of 1 percent to 2.6 percent in early May. When Krawczyk started searching a year and a half ago, the average was even 0.8 percent. A huge difference for the monthly load.
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“For the same financing amount, we would have had to pay 400 to 450 euros less per month in installments back then,” she says. Even the house in Hamm, which is actually much cheaper than the other properties visited, is ultimately too expensive for the couple.
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“The bank would have already given us the loan,” says Krawczyk. “But that was just too tight a calculation for us. Especially now that prices are going up everywhere, we were afraid that we would make ourselves unhappy with rates that were too high.”
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Using the parental home as security
Udo Zimmermann, a specialist in construction financing at the financial service provider Dr. Klein: “It is often the case that those who are looking for a property grew up in their own home. With this, parents can support their children – without any gifts of money.”
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The prerequisite for this is that the parental home has been paid off in full or at least half. Then it can serve as additional security for financing the children and significantly improve the interest rate. “Depending on the individual case, up to 0.4 percentage points less are possible,” says Zimmermann. “This reduces the monthly burden for a loan amount of 400,000 euros by 133 euros.”
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If necessary, parents are responsible for their children
Although parents do not become borrowers themselves, they should be aware that in the worst case they are liable with their property. “If the children can no longer service the loan, the bank usually accesses the children’s property first,” says Zimmermann. “But if the money from the sale isn’t enough, it’s the turn of the parents’ house.”
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Alternatively, the property could only be brought in with a partial amount. This is useful, for example, if there are several children who should be treated the same.
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Real estate as a basis for a new loan
“It is also conceivable that the parents themselves will become borrowers by lending on their house using a new or existing land charge,” says Zimmermann. “Then they can pass on the money as a gift or a private loan.”
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