buying house with credit

[vryy]

I am planning to buy a house (near Hamburg) which costs 300k. My capital is 20k, and the monthly income is ~3k. Most of the offer I received is ~4% yearly interest and ~30 years of repayment. Is it a good time to buy house in Germany? The interest will be re-adjusted after 10 years but paying the first 10 years with 4% interest is crazy to me. But my partner insists that we can lease part of the space.

[Franklan]

I am planning to buy a house (near Hamburg) which costs 300k. My capital is 20k, and the monthly income is ~3k. Most of the offer I received is ~4% yearly interest and ~30 years of repayment. Is it a good time to buy house in Germany? The interest will be re-adjusted after 10 years but paying the first 10 years with 4% interest is crazy to me. But my partner insists that we can lease part of the space.

The rule of thumb: Have 20%, better 30% of the house price available as capital, and finance the rest. In your case the capital ought to be at least 60k, better 90k.

Doing this with 20k sounds like very thin ice to me.

I do not think it is a good time to buy a house in Germany anyway.

[Alberto]

I also bought a house in Hamburg. Well, almost Hamburg: Pinneberg. Actually we bough a very old house, with the land it was on, got it demolished, and had a new house built on this land. Now happy but wiw zad to endure many huge headaches. Building company simply very unprofessional.
And of course we took a mortgage.

Back to your point:
I would say if its a good time to buy property or not depends more on your life situation than on anything else. But if youre in sufficiently settled on family and work front, its almost impossible it's NOT good to buy your first property.
Good luck.

[Alberto]

Some maths here:
say you have overhead cost 15%, which is realistic, so 1.15 * 300k = 345k. Minus your 20k deposit makes 325k to borrow.
At 4% over 30yr makes it 1552/month. So you'd be left with ca 1448/month to live on.

[hh-sailor]

If there is a lump sum coming your way in those 10 yrs, then arrange before you sign the mortgage that early repayments are allowed. That way any windfalls can be used to lower your borrowed capital thus reducing monthly payment.

eg aging aunt or whoever inheritance, bonus from work.

Costs a little more each month, but worth it if it's fits your personal situation.

[Eric7]

I am planning to buy a house (near Hamburg) which costs 300k. My capital is 20k, and the monthly income is ~3k. Most of the offer I received is ~4% yearly interest and ~30 years of repayment. Is it a good time to buy house in Germany? The interest will be re-adjusted after 10 years but paying the first 10 years with 4% interest is crazy to me. But my partner insists that we can lease part of the space.

Those are similar numbers to ours (4.5% if I recall) when we bought our first house here 21 years ago.
Except for the monthly income... I don't think that's high enough to take on a mortgage of this size.

Don't forget you will also have (at least) these additional costs linked to the house:
Insurances
Electricity
Water/bins/local taxes etc.
Telephone/internet
Heating/fuel
Maintenance
GEZ

Also, interest rates might actually be higher in 10 years so that's not something I would count on being a good thing.

[Alberto]

Those are similar numbers to ours (4.5% if I recall) when we bought our first house here 21 years ago.
Except for the monthly income... I don't think that's high enough to take on a mortgage of this size.

Don't forget you will also have (at least) these additional costs linked to the house:
Insurances
Electricity
Water/bins/local taxes etc.
Telephone/internet
Heating/fuel
Maintenance
GEZ

Also, interest rates might actually be higher in 10 years so that's not something I would count on being a good thing.

Sensible point, but these costs are present also when renting, they're not really "additional".

[Eric7]

Those are similar numbers to ours (4.5% if I recall) when we bought our first house here 21 years ago.
Except for the monthly income... I don't think that's high enough to take on a mortgage of this size.

Don't forget you will also have (at least) these additional costs linked to the house:
Insurances
Electricity
Water/bins/local taxes etc.
Telephone/internet
Heating/fuel
Maintenance
GEZ

Also, interest rates might actually be higher in 10 years so that's not something I would count on being a good thing.

Sensible point, but these costs are present also when renting, they're not really "additional".

I meant "additional" as in "additional to the mortgage", reducing the amount of income available for everything else.

That kind of income probably isn't enough to comfortably rent a house either.

[vryy]

I received two offers from the bank, see files. They all separate the financing into two: the first is the bank and the second is KfW. What I'm surprised is that the interest rate of KfW is even higher than the bank and the time is also longer (~35 years, no sondertilgung), which contradicts with what I knew about this bank (https://hypofriend.de/en/german-mortgage-kfw.afb). And second of all, are they good offers IYO?

[Frantic]

Consider that for the first time in many years, since at least one year, the real estate market experienced a drop of 10-15%. At least here in Bavaria.
Why ? Well, because of course the rates increased.

As far as I remember you can choose to have locked interested for 5, 10, 15, 20 years. If you think the rates will decrease in the next years then you can opt for a 5 years fixed mortgage.

[Fraufruit]

If you think the rates will decrease in the next years then you can opt for a 5 years fixed mortgage.

This is crystal ball stuff or we'd all be rich, oder?

[Frantic]

If you think the rates will decrease in the next years then you can opt for a 5 years fixed mortgage.

This is crystal ball stuff or we'd all be rich, oder?

No, it is risk calculation based on information gathering.
Trend now is to lower again the rates or at least keeping them unchanged because the inflation is slowing down if not receding. The amount of debt of companies is generally consistent because during the low rates period (several years) they created "cheap" debt to expand their business (or in some case just to keep going and survive....they call them "zombie company").
Pulling to much the wire of the rates, aka raise too much the rates, will create severe problems for these many companies that need to regularly refinance expiring debts. Assuming central banks rates reach 6%, a 300 million bond at 1% is reaching is repayment due date, in order to repay it the company needs to emit now a 300 million bond at 6-7-8%. That starts to be "painful" and bring to shutdown that company.
That'S why central banks now play carefully with the rates, I believe.
Being this the scenario, then what we can do is just calculate what are the chance that the rates will increase further, what are the chance that the rates will increase consistently (coming back to the double digit). If I open now a 5 year mortgage, at the end of this 5 years, when I have to refinance it, can I sustain an increase of rates till, for example, 6% ? Can I sustain a crazy rates increase till 10-12 % ? WHich risk I want to take ? And if i want to be protected by risk how much I am keen to pay for this ?

[Fraufruit]

Being this the scenario, then what we can do is just calculate what are the chance that the rates will increase further, what are the chance that the rates will increase consistently (coming back to the double digit). If I open now a 5 year mortgage, at the end of this 5 years, when I have to refinance it, can I sustain an increase of rates till, for example, 6% ? Can I sustain a crazy rates increase till 10-12 % ? WHich risk I want to take ? And if i want to be protected by risk how much I am keen to pay for this ?

Yes, it takes a lot of planning and speculation. There are a lot of things going on in the world right now which can escalate even more and cause a lot of uncertainty.

[vryy]

Thank you all for your information. Put everything aside. How does the mortgage work in Germany? Initial term is 10 years. After that, a new contract will be made based on remaining loan and new interest. We can also pay off the mortgage at that time, providing sufficient capital, right?

[Fraufruit]

I believe that is a question for your lender. All contracts are different.

[kiplette]

Thank you all for your information. Put everything aside. How does the mortgage work in Germany? Initial term is 10 years. After that, a new contract will be made based on remaining loan and new interest. We can also pay off the mortgage at that time, providing sufficient capital, right?

That is how ours has worked. I do not know if that is standard.

It runs out next year. We have paid the usual monthly payments plus a Sondertilgung (extra annual payment, agreed at the beginning as part of the Vertrag) each year apart from this year because, well I don't really know - first time we tried to do it ourselves and we muffed it, but no matter, when the ten years are up next year, we'll pay it off (more savvy people might well suggest a continuation is long-term better, but we want it gone).

The bank has made us at least one offer of terms for continuation so if we didn't have the capital we could make new terms and do it again.

If it helps, we negotiated ours through https://crcie.com/ who are international, based in Munich, and very helpful. They advertised on the old TT and have helped loads of us with various financial things. They will also obviously advise you if your income is sufficient to fund the mortgage etc. Paul, very friendly Irishman, was our contact.

[Alberto]

we got 20yr fixed @ 1.91%, with full repayment, and up to 5% a year Sondertilgung. I think it was 2018.
I did make use of Sondertilgung at first. But now I regret it, with numbers being what they are better put those extra savings into investment, where I earn a lot, rather than debt repayment, where I would save peanuts.

Compare to the some other countries, here in Germany, fixed rate for super long periods are more common.