Buying a property is a major financial decision that requires careful planning. How do I work out my budget? What financing options are available? And where can I get advice? This article provides an overview to help you prepare for buying a property.
1. how do I calculate my budget correctly?
Before you start looking for a property, you should make a realistic assessment of your budget. Take into account your deposit, the monthly repayments you can afford and the additional costs involved in the purchase.
1.1 Calculating equity
Equity is the amount you contribute yourself towards the financing. How much of this is required and what terms are available depend, amongst other things, on the bank, the property and your financial situation.
1.2 Calculating the monthly charge
Plan your loan repayments so that you have enough money left over for day-to-day expenses and unforeseen costs. Compare your income against your housing and living costs, insurance premiums and other loans. Also make sure to set aside funds for maintenance.
1.3 Plan for additional costs
- Land transfer tax, depending on the federal state
- Notary and land registry fees
- Any agreed estate agent’s commission
- Potential renovation and removal costs
- Ongoing costs such as service charges, energy and maintenance
Only once these costs have been taken into account can a viable overall budget for the purchase price and financing be determined.
2. What funding options are available?
The right financing option for you depends on your financial situation, your plans and your risk appetite. Have the terms and risks assessed on a case-by-case basis.
2.1 Annuity loan
The instalment amount usually remains the same throughout the agreed fixed-rate period; the balance between interest and capital repayment changes over time. Pay attention to the fixed-rate period, the outstanding balance and any possible unscheduled repayments.
2.2 Full-repayment loans
With this option, the loan is repaid in full within the agreed fixed-rate period. This often requires higher monthly repayments, but can prevent any outstanding balance at the end of the fixed-rate period.
2.3 Subsidised loans
Depending on the project, funding schemes – such as those offered by KfW – may be available. Conditions and availability are subject to change; please check the current offers before submitting your application.
2.4 Variable-rate loans
With variable-rate loans, the interest rate is adjusted regularly. Whilst there are opportunities when interest rates fall, there is a risk of higher repayments should interest rates rise.
2.5 Building Society Savings Agreement
A building society savings plan combines a savings phase with the option of a loan at a later date. Whether it is worth it depends on the costs, the eligibility criteria and your plans.
3. Where can I find advice on financing?
Don’t just compare interest rates; also consider the total costs, the fixed-rate period, the repayment terms and the flexibility of the offers.
3.1 Banks and savings banks
Your main bank can be your first point of contact. An additional comparative quote can help you assess the situation.
3.2 Financing intermediation
Mortgage brokers can compare offers from different providers. Ask about their fees and the range of providers they work with.
3.3 Comparison websites
Online comparisons provide an initial guide. Whether the terms and conditions shown apply to you will only be determined once your documents have been checked.
3.4 Recommendations from estate agents or property developers
A recommendation can make it easier to get in touch; nevertheless, do compare several offers and be aware of any potential conflicts of interest on the part of the agent.
Conclusion
Careful budget planning and a comparison of financing options will help you assess the long-term financial burden. Have the terms and conditions – and, where applicable, any available grants – assessed in relation to your specific circumstances before you decide to make a purchase.
