FINANCING OF PRIVATE REAL ESTATE

When financing a private property, many people seek support and advice to navigate 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 talked to David Savasci, CEO of miracl, about real estate financing.

miracl has already supported many of our clients in financing their real estate projects. We talked 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 just 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 suits 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 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 keep an overview and to make the offers comparable. With the help of our software, we can easily create an overview and extract the parameters for comparability, providing assistance with one of the biggest financial decisions.

WHAT TYPES OF FINANCING FOR PRIVATE PROPERTIES ARE THERE?

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

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

Here there are different possibilities. Either you go directly to your house bank, apply there for the examination of the financing project, and receive an offer afterwards. Or you go to a credit broker like miracl. We compare all reputable banks and automatically search for the best offer for the customers. We then discuss the initial details and conduct an online consultation, during which we collaboratively develop the best financing offer for the project. Afterwards, all documents are uploaded to the miracl platform, and we prepare the necessary documents for the bank, so the customers don’t have to deal with unnecessary bureaucratic tasks. The documents are sent to the bank, and within 5-7 business days, we receive an approval from the bank. After that, the purchase contract is created and sent to the bank so that the loan agreements can be drafted. We accompany our customers from the initial inquiry to the handover of the keys. However, these two options do not exclude each other in any case. If customers have already visited their house 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 to consider for any financing. On one side, the ratio of the monthly loan installment to the income, which must not exceed 40%. On the other side, the equity ratio is a key criterion for banks. Due to a decree from the Financial Market Authority, at least 20% of the purchase price of the property must be available in the form of equity. However, if one of these criteria cannot be met, banks have a so-called special contingent of 20%, which allows financing for customers who do not meet one of these criteria.

WHAT INTEREST RATE DEVELOPMENT AWAITS US THIS YEAR?

For fixed interest rates, we expect a slight increase in 2023. In 2024, we estimate that they will stabilize, with interest rates remaining at approximately the level of the end of this year. Variable interest rates will rise slightly again in July, where we also expect a slight 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 years term).

We thank you for the interview!