FINANCING OF PRIVATE REAL ESTATE

Many people wish for support and advice when financing a private property to escape the banking jungle. Especially in times of rising property prices and stricter lending guidelines, it is often a great challenge to find the right financing solution. To shed light on the matter and receive valuable tips, we spoke with David Savasci, CEO of miracl, about real estate financing.

miracl has already supported numerous our clients in financing their real estate projects. We spoke with them about the current developments in the real estate market, the various financing options, as well as important factors such as equity, interest rates, and repayment.

Whether you already have a property in mind or are at the beginning of the process, this interview provides valuable information and advice to optimize your financing.

HOW DO I OPTIMALLY FINANCE A PRIVATE PROPERTY?

The optimal financing that fits all customers does not exist. The best solution is always "tailored" and depends on various individual factors.

·      Are there already properties?

How long should the financing term be?

·      Would I like to repay the loan faster? 

These are just three of many questions that we clarify with our clients during our consultation sessions in order to select the best financing option. A major problem is the very different internal conditions and policies of the banks, which make it very difficult for individuals to maintain an overview and make the offers comparable. With the help of our software, we can easily create an overview and extract the parameters for comparability, providing assistance in one of the biggest financial decisions.

WHAT TYPES OF FINANCING FOR PRIVATE REAL ESTATE EXIST?

There are variable and fixed-interest financing options. The advantages and disadvantages of these two options depend on the situation of the customers as well as the current market conditions and are very individual. Additionally, the term of the financing can be adjusted, which can last up to 35 years. There is also the possibility of a mixed financing, where for example, 30% of the term is variable and 70% is fixed-interest.

HOW DO I PROCEED, WHAT ARE THE STEPS TO OBTAIN FINANCING?

There are different options available. Either you go directly to your home bank, apply for an evaluation of the financing project there, and then receive an offer. Or you go to a loan broker like miracl. We compare all major banks and automatically search for the best offer for the clients. Subsequently, we discuss the initial details and conduct an online consultation where we work together to develop the best financing offer for the project. After that, all documents are uploaded to the miracl platform, and we prepare the necessary documents for the bank, freeing the clients from unnecessary bureaucratic tasks. The documents are sent to the bank, and within 5-7 business days, we receive an approval from the bank. Afterwards, the purchase contract is created and sent to the bank so that the loan agreements can be prepared. We accompany our clients from the first inquiry to the handover of the keys. However, these two options do not exclude each other in any case. If clients have already been to their home bank before contacting us, we can check the existing offer in just a few moments and provide our assessment.

WHAT CRITERIA ARE IMPORTANT TO OBTAIN FINANCING?

There are 2 criteria that must be considered in any financing. On one hand, the ratio of the monthly loan payment to the income must not exceed 40%. On the other hand, the equity ratio is a key criterion for banks. According to a decree from the financial market authority, at least 20% of the property's purchase price must be available in the form of equity. However, if one of these criteria cannot be met, banks have what is called a special allotment of 20%, allowing them to finance customers who do not meet one of these criteria.

WHAT INTEREST RATE TREND AWAITS US THIS YEAR?

For fixed interest rates, we expect a slight increase in 2023. In 2024, we anticipate they will stabilize, meaning interest rates will remain approximately at the level of the end of this year. Variable interest rates will rise slightly again in July, and we also expect a small increase at the next adjustment. Due to these developments, fixed interest rates are likely to remain below variable rates in the coming years.

The following graphic illustrates the development of fixed interest rates in the year 2023 (25-year term).

Thank you for the interview!