Purchasing house

36 posts in this topic

On 3/22/2022, 11:20:26, hellocommunity said:

Hello All,

So we are interested in purchasing a 1971 House. The house needs renovation.  We have got an approx. estimation from our craftsman.
A meeting with bank has already taken place and we are getting following offer from the bank.

House cost    416000 Eur
NK        44000    Eur

Rennovation/Repair    80000 Eur
Modernisierung        25000 Eur

The offer is agreed upon  House Cost + Rennovation/Repair = 495000 Eur and the rest ~ 69000 will be given by us.
The Zinsen Rate which we have been offered is,

2,36% (Effectiv)    15 Years(Zinsbindung)    --->    1724 Eur Monthly Rate

Laufzeit : 35 Years
Sondertilgung 5% per annum

I would like to know if this is good offer?

The Bank agent was not in favour of KFW-Förderung as he said now the rates of which have as well increased (1,5%) and moreover it takes nearly 6-7 Months to get the approval for KFW from the authorities
and only then can the repair-work begin.
I am not sure if this will be a wise decision not to include KFW-Part here. Considering the fact that now the Zinsen have really taken a sharp uptrend in last 3 months.  :(

If you feel any other important factors I may consult with bank then please let me know.
Your valuable suggestions are much required.
Thanx.

Regards.

 

wow 2.36% ...when did that rise happened...zins rate were below 1% some 2 months back...We had our new mortgage from DKB bank in Jan ,They were hassel free and offering better rated (only some basis points) than our old /other banks..I still have contact with them..  Incase you want and have not already signed something, i can connect you with them. send me a pm.

 

 

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1 minute ago, YoRambo said:

 

wow 2.36% ...when did that rise happened...zins rate were below 1% some 2 months back...We had our new mortgage from DKB bank in Jan ,They were hassel free and offering better rated (only some basis points) than our old /other banks..I still have contact with them..  Incase you want and have not already signed something, i can connect you with them. send me a pm.

 

 

On 3/22/2022, 11:20:26, hellocommunity said:

Hello All,

So we are interested in purchasing a 1971 House. The house needs renovation.  We have got an approx. estimation from our craftsman.
A meeting with bank has already taken place and we are getting following offer from the bank.

House cost    416000 Eur
NK        44000    Eur

Rennovation/Repair    80000 Eur
Modernisierung        25000 Eur

The offer is agreed upon  House Cost + Rennovation/Repair = 495000 Eur and the rest ~ 69000 will be given by us.
The Zinsen Rate which we have been offered is,

2,36% (Effectiv)    15 Years(Zinsbindung)    --->    1724 Eur Monthly Rate

Laufzeit : 35 Years
Sondertilgung 5% per annum

I would like to know if this is good offer?

The Bank agent was not in favour of KFW-Förderung as he said now the rates of which have as well increased (1,5%) and moreover it takes nearly 6-7 Months to get the approval for KFW from the authorities
and only then can the repair-work begin.
I am not sure if this will be a wise decision not to include KFW-Part here. Considering the fact that now the Zinsen have really taken a sharp uptrend in last 3 months.  :(

If you feel any other important factors I may consult with bank then please let me know.
Your valuable suggestions are much required.
Thanx.

Regards.

 

wow 2.36% ...when did that rise happened...zins rate were below 1% some 2 months back...We had our new mortgage from DKB bank in Jan ,They were hassel free and offering better rated (only some basis points) than our old /other banks..I still have contact with them..  Incase you want and have not already signed something, i can connect you with them. send me a pm.

 

 

 

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We had some Covid-Inflation (3.1% in 2021), probably it is reflected now in the new credits.   However Interhyp tells me you can get something slightly better, 2.1  - 2.2%.

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On 3/23/2022, 9:29:01, hellocommunity said:

I somehow got little paranoid when I did not get KFW option from bank. I am thinking of contacting KFW authorities. But I have been told that it takes 6-7 Months to get approval and only then we can commence the rennovation in the house. Which is not what we want. As by then we must have already moved in new house and then carrying out rennovation part is troublesome and is not recoomended? I wonder how people solve this problem with KFW? Anyone here has this experience?

 

Some renovations are less disruptive than others after moving in. I got a new front door with KfW support within the first 8 months of moving in, and the installer handled everything for me (20% funding and energy expert fee 50% off). It was a really clean swap and they did not damage the renovated and repainted walls of my entrance hall. Then I renovated the roof of the house with new roof tiles and new insulation two years later after moving in. It was hardly disruptive at all - they were finished in 4 days. I also got the painters to come and paint the exterior after the roofers left the scaffolding up for me for another week. When I bought the house the bank tried to offer me a bigger mortgage amount in order to cover planned renovations (at 1.6% interest), but I applied and got a separate KfW loan instead for the roof (at only 0.57% interest). KfW are tricky to deal with - I was fortunate to get the 20% in funding from them for the roof, along with the loan, but I lost the 50% funding for the energy expert because KfW closed the application process right before I could apply for it! No warning on their website! Not even my energy expert knew about it (in retrospect, he kind of sucked because he didn't explain to me the order in which things should happen - and I was confused/afraid to apply too early and get penalized for starting earlier without waiting for official KfW approval - they were behind by about 2 months, and I don't know why the roofers didn't handle it for me like the door contractor - but they did an excellent job otherwise). It was not too much money lost so I count my blessings on other things (like the 6000 euros saved on the roof). I also got the KfW Baukindergeld (24000 euros over 10 years) which basically covers the cost of my new roof (30k-6k=24k) - that was the easiest out of the three actually.

 

So it is possible to do some KfW stuff after moving in. I would say everything on the outside is no problem (roof, exterior walls, front doors, windows). Anything with pipes and electric better to get done before you move in. 

 

Unfortunately I still have to renovate the bathroom (it is fugly 1960s style) and the plumbing going to it, but luckily it will be going through rooms and walls that I have not already repainted/renovated. I kind of regret now that I didn't do it before moving in, but I wanted to keep some cash in the bank in case of hard times. I try to keep 1.5 years of funds liquid to cover living costs in case of the unexpected...   I wasn't willing to drain my bank account so quickly and decided to do things piece wise. It gave me more time to research and think about things too. But then it takes longer to finally get the house 'finished' and you have to be willing to tolerate imperfections longer. Not everyone can delay gratification that long.

 

 

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Thanks Wien4ever for brief reply.  I might have questions in this regard but first I would like to give you all update. Is it ok to ask here or should i send private message?

 

The Agent said that there is one more person who wish to buy this house and the owner has to decide between the two. 

But he said that only Finanzierungsbestätigung from Bank is not sufficient and owner wants that all the necessary steps should be concluded such as Gutachtung by bank and all. Only then he can think of whom to choose between the two. 

This was little shocking for us to know. I do not know what are he upto here?  What do you guys think?

 

Another question I have to ask when is the good time for negotiation? Prior experience tell us that it is better not to ask for lower price initially as then it might rule out our chance of getting the house, especially when there are other intended buyers available.

 

 

 

 

 

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6 hours ago, hellocommunity said:

The Agent said

 

any proof of another buyer or is it just a tactic?

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Yep, kind of looks like they want you to make a higher offer even if there is a 2nd party involved. Might be telling them the same thing. Price war.

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@Catjones:  Proof? I do not think Agents are allowed to disclose it. Can they?

 

@frankfruit:  Yes we also think so. But what else can we do?? We are at receiving end. :(  

                      My Bank has now agreed to take Gutachtung round even though there is no assurity of getting the house. As after gutachtung and confirmation of finance, the owner will then decide between the two parties. Huh!!!

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7 hours ago, hellocommunity said:

@Catjones:  Proof? I do not think Agents are allowed to disclose it. Can they?

 

Given the agents' in DL reputation, what if they said they had 3,4,10 offers, what then?

A simple sales offer could have the private info redacted.

My point was that agents have a self-interest in getting the highest offer.

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€1724 a month seems a lot, could it go up? For how many years? If you are not sure, do not sign!

 

Might make more sense to rent, in most places you can rent a decent home for less than half that.

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@fietsrad  I know it would have been around 1600 till last year. This year rate has increased around 0.5% in 3 months. Why we are interested still (?) , it has been 3 years we are looking for the suitable home and only now we are shortlisted finally. But still there is one more buyer. So rat race is on. 

BTW the rate 1724 is fixed one. 

We have been in rented apartment since more than 10 years now. 

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17 hours ago, hellocommunity said:

 

BTW the rate 1724 is fixed one. 

 

 

Did I understand correctly, this part of the mortgage it is only for 15 years, then afterwards you have to get another mortgage until the end of 35 years? They can't offer you a longer fixed interest rate? I would be worried about the hike in interest in the future.

 

I bought a terraced house for ~290k and told my (Haus)bank that I wanted to pay it off relatively quickly (18 years). After covering nebenkosten, the full starting amount of the loan was 260k. They got me two mortgages, 9 years each. The first one was at 1.6% effektiv with max 5% sondertilgung, then the second one at a higher 2.0% effectiv, which I can pay it completely off at any time (no restrictions). So for example, if I wanted to, I could pay it all off at year 10 and save myself about 22k in interest or stick to the schedule and pay the full 44k in interest.

 

Karl's calculator is really useful for comparing scenarios:

https://www.drcalculator.com/mortgage/

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On 2.4.2022, 16:13:12, wien4ever said:

 

Did I understand correctly, this part of the mortgage it is only for 15 years, then afterwards you have to get another mortgage until the end of 35 years? They can't offer you a longer fixed interest rate? I would be worried about the hike in interest in the future.

 

I bought a terraced house for ~290k and told my (Haus)bank that I wanted to pay it off relatively quickly (18 years). After covering nebenkosten, the full starting amount of the loan was 260k. They got me two mortgages, 9 years each. The first one was at 1.6% effektiv with max 5% sondertilgung, then the second one at a higher 2.0% effectiv, which I can pay it completely off at any time (no restrictions). So for example, if I wanted to, I could pay it all off at year 10 and save myself about 22k in interest or stick to the schedule and pay the full 44k in interest.

 

Karl's calculator is really useful for comparing scenarios:

https://www.drcalculator.com/mortgage/

 

Yes @wien4ever  The rate is fixed for only 15 Years as a standard practice from any bank. Your suggestion is interesting. But my offer also has one option called sondertilgung which says each year I can pay %5 extra for 10 Years. And after 10 Years I can pay off whatever % of amount under sondertilgung. I guess that is equivalent to what you got for your second mortgage. Isn't it?

How about asking a Bank instead of 15 Years , lets say 20-25 Years of fixed rate and see what it says? That way I would have fixed rate for longer duration as per your suggestion. 

 

Secondly I would like to know the community few questions.

 

1. The Zinsatz have increased exponentially in last 3 months. And everything else in terms of cost of living, Oil, Diesel etc etc. because of well known reasons Pandemie, War. The calculations what we made until last year have certainly took a hit now so much so that we are now rethinking our decision to buy the house in this time-frame. What do you guys think or your perspective? Is it advisable to wait for lets say 6 to 12 months and hope things will cool down a bit.  My bank says that in coming months the Loan-rates are going to increase further.  :(

 

2. Here I want to list some hypothetical thoughts which I am sure everyone goes through while taking biggest decision of their lives, eg House Loan. Please excuse me if I sound negative here but I want to just give a thought. 

    i> What happens in case after taking loan financial crisis comes like it happened in past in 2008. How does it affect us as a loan borrower?

ii> What happens if the war starts in Europe and we have to leave Germany for some reason. What happens to the property which we own? Or the active loan?

iii> Can a person resale a home where loan is not fully paid off?

Sorry if i sounded so paranoid but recent developments(?) in the world forced me to think about these possibilities.

 

Yours commens and suggestion are greatly appreciated. Thanx in advance.

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Here's my take on your last 2 questions. All opinions, even if I make it sound like facts by the way that I write:

1. Possible short term changes to borrowing costs / house prices.

  I don't expect either mortgages or housing to become cheaper in the next 2 - 3 years. At least where I live, it continues to get more and more difficult to find suitable properties to buy and so demand is outweighing supply. But, more importantly, nobody can be certain what prices and costs will do in the future which is why the decision to buy has to be based on your current ability to afford it as well balancing the pros and cons of doing so.

  Do you want to remain in the same property for long enough that the cost of buying is less than the money you save by no longer renting?

  When you buy this house you immediately pay 44,000 for the privilege of buying a house (NK). You are also investing 105,000 to repair / bring the property up to some of the modern standards. I would not assume that the property value increases by 105,000 after repairs and modernizing work, so some portion of this has to be written off as NK too... I would hazard a guess at 40,000 or more. But, to simplify and be extremely generous, let's say your total non-recoupable expenses are ~60,000.
  With 2.36% effective interest on your mortgage, you start off paying ~11,600 per year in interest payments, while paying off 20,700, for a net mortgage payment of ~9,100 per year. This 9K per year is what you're paying to yourself (paying into your house) instead of paying rent to a landlord.

 

You can clearly afford to pay 20,700 per year because that's what you have agreed as fixed repayments with the bank. So, you can now start to pay ~11K per year to a bank and invest the remaining money into your house. Alternatively, you can continue to rent and invest the leftover into savings. Both are legitimate options. What are you paying for rent currently? I will make a wild guess that you pay 8,000 per year (cold) on rent, and that you can, therefore, afford 12,700 in savings.

   If that is true then you will be financially worse off for the foreseeable future by buying this house, because you will be giving the bank more money in interest payments than you would have been giving your landlord in rental payments. You would be better off to save money until you can afford a better mortgage.

  So what if you are paying 15,000 per year on rent (again, cold)? Then, by buying the house, you start to pay less money to other people than you keep for yourself. In this case, about 3,400 per year less.

 

So, if your current rent is higher than the projected interest on the mortgage, you can start to save money by buying a house. Taking the last figures, you could save 3,400 per year. But you have non-recoupable expenses of 60,000 (probably much more) connected to buying. That means the money you save by buying vs. the cost of buying takes more than 15 years to balance out. If there is a reasonable chance that you might want to move house within the next 15 years, and if your rent is less than 1,250 (cold) per month, then you will almost certainly be financially worse off by buying a house now.

 

Okay, this does not factor inflation and rising house prices or rising rental costs into the equation. All of these help to push the numbers in the direction of buying instead of renting. But based on todays money, this purchase is a very long-term commitment which has very serious financial repercussions if you need to move again in the next 15 years.

 

When I decided to buy 5 years ago I was lucky to be able to afford a larger down-payment and got better borrowing conditions than are currently available. At that time I crunched the numbers properly, factoring in interest and rent increases and everything else, and still came to the conclusion that my break-even on buying a house was 7 years!

Again, put simply, that is the time it takes for the money that you SAVE by buying compared to renting becomes equal to the non-recoupable expenses associated with buying a house. If you have to move within this time-frame then you would have been financially better off by continuing to rent.

 

Obviously wrote much more than I intended to there, but anyway onto question number 2 i. what happens in a financial crisis?

  Assuming the bank does not go bankrupt, your contract holds and you carry on paying the same. If your earnings go down then that's a problem. If the value of the house goes down then you still pay the same anyway, that's why it's important to check the affordability today instead of trying to estimate if it will be better or worse in the future. You simply cannot know.

2 ii. what happens in a war?

  If you have to leave your house, or you lose your house, due to a war, then you lose everything. If this is a serious concern of yours then you should not buy. You'll still owe the bank all of the borrowed money even if the house no longer exists.

2 iii. what happens if you move before paying off the mortgage?

  There are a few possibilities and you might need to check your contract or ask the bank, but in general you can either:

a. Cancel the mortgage contract and pay fines (probably amounting to the amount of interest you would have had to pay if you had upheld the contract, but the real conditions will be outlined in the contract)

b. The buyer of your house can also buy the mortgage and continue to pay it with the same conditions.

c. You can transfer the mortgage to your new house and continue to pay it with the same conditions. Depending on the price of the new house you might need to take a second mortgage to cover the difference.

 

Again, no matter which option you take, you will have new non-recoupable expenses associated with changing houses.

 

Last, but not least: you didn't ask about it but it's important anyway. I hope that you have factored in a big enough safety buffer so that you can afford to live / pay the mortgage in case you lose your job and don't have an income for 1 - 2 years. When you owe large sums of money to large institutions you always need a good amount of money left in the bank for "rainy days"!

 

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toBnruG has very good points about rent vs buy. It really only makes sense if you are in it for the long haul.

 

You can use the NY times rent vs buy calculator (if you get a paywall, trying using a private window to hide your cookies):

https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

 

nerdwallet has a simpler one:

https://www.nerdwallet.com/mortgages/rent-vs-buy-calculator

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