How it works with real estate financing

The rules for lending to finance real estate have become stricter. As a result, buying a property currently seems out of reach for many potential buyers. However, it is still feasible as long as careful financial planning is carried out. Below are some important considerations:

Many people looking for real estate are hesitant in view of the current offers to buy. Inflation and rising interest rates have led to a drop in demand for real estate. This has prompted many sellers to reduce the prices of their properties to make them more affordable.

Nevertheless, some sellers are having difficulty finding interested parties. It may therefore be worthwhile for potential buyers to disclose their financing options now. This enables sellers to respond better to market developments. Otherwise, they risk their properties becoming unsaleable. However, it is advisable to clarify the financing with the bank before making an offer.

The role of equity

Equity is still required to purchase a property. Experts in real estate financing recommend covering around 20 to 30 percent of the purchase price of the property with equity. This also includes additional costs such as notary, land registry and estate agent fees as well as land transfer tax. The more equity you have available, the easier the purchase will be and the more likely it is that banks will grant you a loan. This also has an impact on the terms of the financing. In many cases, the family can also contribute additional equity with private loans or inheritances.

Plan thoroughly

Start planning early and calculate exactly how much property you can afford. The amount of equity you have and your net monthly household income are decisive factors that determine how expensive a property can be. It is advisable to seek advice from both an independent financial expert and an experienced real estate professional. A qualified local real estate agent can tell you where to find properties within your budget. The financing expert will help you compare different financing offers to choose the one that suits you best.

Take advantage of subsidies

Take advantage of state subsidies when you buy an energy-efficient property. These subsidies can take the form of allowances, tax benefits, lower interest rates or non-repayable grants. It is worth checking whether you can benefit from programs such as "Wohn-Riester", a low-interest loan from the Kreditanstalt für Wiederaufbau (KfW), a subsidy from the Federal Office of Economics and Export Control (BAFA) for renewable energies or regional subsidy programs. Experts in the fields of financing, energy and real estate can help you with this process.

Do you want to buy a property and have questions about financing your project? Please contact us! We will be happy to advise you.  

Note

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.

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