The dream of owning your own home! 🏡
Hi together, we bought a condominium at the end of last year. Reasons for this were primarily the provision for old age and general wealth accumulation for the future, as well as the good interest rate environment and the fact that we do not want to put thousands of € a year in rent. The goal is to build/buy a house in the next 5-10 years, depending on what opportunities arise, so that the apartment then generates rental income. 😬
Since some may have similar plans here, I wanted to share our experiences and processes with you in the following. It should be said that these are our personal assessments and experiences and of course everyone should inquire independently before such a step!
It all started with the question: apartment or house... Since the current market is booming and the demand is high... there are corresponding waiting periods for plots of land or even real auctions for houses where buyers take turns to outbid each other. In the end, we decided on an apartment, the decisive factor was ultimately the object itself, which is currently in the construction phase. It is located in the immediate vicinity of a lake, but also very centrally in a good area in which the land values are constantly increasing (information about land values is provided, for example, by the land value information system BORIS in NRW) [1].
After the first contact with the real estate agent, it went to a meeting, in which it was about general procedures for the purchase and also costs, more about this later. Subsequently, we went to the construction site and were able to get an idea of the construction project. As a tip, I can give you that you think about appropriate questions in advance, so that the first appointment can be productive and interest is signaled.
Some brokers/owners work with a reservation fee. So it was also in our case. I.e. if you are interested, the broker can reserve the object for you until a certain date... and not infrequently they also take a fee for this, which however does not always take into account all legal conditions. More about this here [2]. In our case, the fee was 1,000 € which was then credited to the purchase price.
At this point, of course, the financing comes into play. At the same time we have informed ourselves with different! independent financing consultants about a loan. Basically, many use the same platform, so that similar interest rates are given. In the end, I think it's important that you get along well with the respective consultant and feel safe. Often these also have even closer ties to banks and can get out the one or other %Punkt compared to tied consultants. Once you have made your decision, you have a corresponding financing confirmation issued, which is valid as proof for the seller and the purchase contract can be signed.
After you have decided to buy the property and the financing works in theory, the broker can send you the draft purchase agreement and also the draft declaration of division (regulates how the common property and the associated costs are divided among the owners). After at least 14 days of consideration/examination of the documents, the notary appointment can then follow. We have only had the contract checked ourselves and by relatives, as they have already made some purchases themselves.
Before we went to the notary, we applied for a BEG residential building subsidy (461) through KFW, which applies if the property has a certain energy certificate. In our case, it is an efficiency house 55 EE, which pays a subsidy in the amount of 26,500 € after completion. In addition, it should be said that the new federal government has stopped the promotion of energy-efficient buildings with immediate effect and applications for the program of the state development bank KfW are currently no longer approved. [3]
Once the purchase contract has been signed at the notary, the financing can also be concluded at the bank. We have ultimately had about 7-8 appointments until we were sure to what conditions we want to close. Through the bank you then get a land charge certificate, which is submitted to the notary. The land registry takes care of the registration, which then serves as security for the bank. In addition, the notary arranges for a so-called priority notice of conveyance at the land registry. This is the first step towards the change of ownership, which means that the seller no longer has the option of selling the property to another interested party. In addition, the notary reports the sale to the tax office. This is where the real estate transfer tax comes into play: Only after you have paid this tax, the sales process can continue. Since our property is located in NRW, the real estate transfer tax is 6.5% of the purchase price (varies depending on the federal state) [4].
In the following, I would like to go into more detail about our financing and related thoughts:
Purchase price: 424,900€ (yes very expensive area, incl. strongly upscale equipment).
+ GrESt 6.5%: 27,619€ directly to the tax office 🤕
+ Notary fee 2%: 8.498€
= 461.017€
Equity capital used: 161.017€
Annuity loan: 300.000€
Debit / effective interest p.a.: 0,93% / 0,96%
Repayment rate: 6.22% (will probably be reduced if further real estate is purchased)
Special repayment 5% p.a.
Fixed interest rate: 15 years
Soooo..... In the framework conditions, of course, your individual circumstances, goals, etc. must be taken into account. Especially the interest rate depends on the loan amount, equity ratio and much more. It is certainly wise at low interest rates to use the longest possible term, low repayment and little equity used, because you have high opportunity costs with the EK used. If you aim to rent out the property directly, you can use the long term (20 years+) and a low repayment rate to cover the financing through rental income. However, since we want to use the apartment ourselves first and have a quieter sleep if the loan is paid off as quickly as possible, we have decided for "only" 15 years and start with a relatively high repayment rate: 0.93% borrowing rate + 6.22% repayment results in 300,000 € = 21,450 € per year, divided by 12 months = 1,787.50 € monthly installment. The corresponding amortization schedule will show you later an exact listing of the installments, since with each year the absolute interest values decrease and the actual amortization of the loan increases. For example, in the 2nd year, your remaining debt is only 281,340 €, to which the 0.93% interest rate refers and is correspondingly lower in absolute terms than the 300,000 € in the 1st year. Since the repayment rate of 1787.50 € remains the same overall, the actual repayment increases from year to year. Important to us in the choice of the repayment rate was also the possibility to live reasonably and also to put aside additional capital, so that at least the incidental costs (land transfer tax and notary fees) can be paid for the next house purchase. Thus, the monthly repayment amounts to "only" 30% of our net income, another 20% goes into the formation of further equity and another 20% is saved as a possible unscheduled repayment, which can then be used opportunely at the end of the year to pay off. The unscheduled repayment is not possible in every loan, but in our case it amounts to a maximum of 5% p.a. (15,000€).
If it should come then so far that we buy in the next years a property or build house we would reduce the repayment rate on a minimum (must be planned in the apron, so that the taken up loan, these conditions for free repayment rate adjustment brings along), so that then the new credit is paid off with priority and the "old" over renting incomes can be carried. If the repayment rate is changed, the repayment plan planned at the beginning no longer fits, of course, and it may be necessary to think about follow-up financing.
Currently, the property is still in the construction phase, we have a guaranteed completion date at the beginning of 2023. The payment of the purchase price is based on the progress of construction, there are also some regulations, see [5]. After the purchase price has been paid in full, the notary public applies for the transfer of ownership in the land register and all rights and obligations are transferred to the new owner on the transfer date, which is also called the change of use and encumbrance and is fixed in the purchase contract.
Whoever has made it this far, thank you for reading. I wish you all good luck with your planning, feel free to post your thoughts or goals in the comments. 🥳🚀
VG
[1] https://www.boris.nrw.de/borisplus/?lang=de
[2] https://vonbaum.immobilien/warum-keine-reservierungsgebuehr-fuer-immobilien-verlangen/#:~:text=Always%20request%20brokers%20im,however%20legally%20most%20not%20permissible%C3%A4ssig.
[4] https://www.smart-rechner.de/grunderwerbsteuer/rechner.php
[5] https://www.drklein.de/auszahlung-baufinanzierung.html
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