Even if the rise in interest rates has made real estate financing more difficult in the eyes of many property seekers, buying a property is still possible. Property seekers need to adapt to the changed conditions. But how can they do this and how much equity is required?
Many banks have become more cautious when granting loans, say financing experts. For one or two properties - especially in peripheral regions such as Brandenburg - they will apply risk discounts.
According to experts, they have also tightened the credit guidelines. For example, different flat rates are now applied for living, operating and heating costs. In recent years, banks have been charging 2.50 euros per square meter for operating and heating costs, but now charge up to four euros. They now also apply ten to 15 percent higher flat rates for living costs.
How much equity do the banks expect?
Rule of thumb: the more equity you contribute, the better the conditions. According to financing experts, at least 15 to 20 percent of the property price should be covered by your equity.
In addition, you must pay ancillary purchase costs such as land transfer tax and notary fees from your equity share, as the banks do not finance these costs. This is because there is no material equivalent value for the banks that would secure the loan.
If a bank does offer financing for this, the interest rates will usually be very high. Alternatively, you can also take out an additional installment loan or a personal loan from friends and relatives to cover these costs. In any case, it is advisable to calculate thoroughly beforehand whether you can service the monthly repayments for all loans.
Example
For example, if you are buying a property that costs 300,000 euros, you should contribute around 60,000 euros - i.e. 20 percent - in equity to finance the property. Depending on the federal state, the land transfer tax is between 3.5 and 6.5 percent of the purchase price. At 6.5 percent, you will therefore need to budget an additional 19,500 euros. The notary fees amount to an average of 1.5 percent of the purchase price, i.e. 4,500 euros. In this example, a total equity share of 84,000 euros must therefore be contributed.
Buying real estate without equity
Buying a property without equity is possible under certain conditions. If you have a high income, your cost of living is low and the property is cheap, a bank can also grant you 100% financing. The main disadvantage, however, is that the interest rate will be very high. You will therefore have to pay a higher monthly installment and it will take longer to pay off the loan.
So get advice from a financing expert before you start looking for a property.
Are you unsure how to find and finance an affordable property? Get in touch with us! We at Becker Immobilien in Bonn will be happy to advise you and can recommend financing experts.
Notes
For reasons of better readability, the generic masculine is used in this text. Female and other gender identities are explicitly included where this is necessary for the statement.
Legal notice: This article does not constitute tax or legal advice in individual cases. Please consult a lawyer and/or tax advisor to clarify the facts of your specific individual case.
