Real estate financing – what options are available?

Sound financial planning ensures security and is essential as a solid foundation for your property purchase. Even before you begin your search for a property, you should have a clear plan for financing your new home.

We have summarized the available financing options for you in the following overview. This serves as an initial guide to help you determine which option is suitable for you. Please also remember that equity capital is required for real estate financing.

To delve deeper and establish solid financing, we recommend consulting a financial expert. We would be happy to recommend a suitable advisor.

The annuity loan – the classic

The annuity loan is the most common financing method. A fixed monthly payment is made, consisting of a principal repayment portion and an interest portion. The latter decreases over the years, while the principal repayment portion increases by the same amount.

The building society loan – it depends

This loan makes sense if you've been saving for a while and your building society savings contract is ready for payout. If the amount is still small, you should use it for future repairs or renovations. It all depends on your plans.

The bullet loan – when a windfall is in sight

If you know that you will receive a larger sum of money in the foreseeable future and within a specific timeframe, you can take advantage of a bullet loan. The loan is repaid in a single lump sum at the end of the term; during the loan period, you only pay interest.

The KfW loan – for energy savers

This loan is a subsidy from the KfW Development Bank, which you can usually combine with other financing options. This subsidy is particularly useful if you are planning to build an energy-efficient property or a low-energy house.

The fully amortizing loan – security until the very end

If you choose to use a fully amortizing loan for your property financing, you'll have optimal planning security. With this type of loan, the financing is calculated so that the entire loan is paid off by the end of the fixed interest period.

Are you looking to buy a property and need help financing it? Ask us! We'd be happy to advise you.

Notes

For the sake of readability, this text uses the generic masculine form. Female and other gender identities are explicitly included where relevant to the statement.

Legal notice: This article does not constitute tax or legal advice for any specific case. Please consult a lawyer and/or tax advisor to clarify the facts of your individual situation.

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