FINANCING OF PRIVATE REAL ESTATE

When financing a private property, many individuals seek support and advice to navigate the banking jungle. Particularly in times of rising real estate prices and stricter loan approval guidelines, it is often a significant 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 of our clients in financing their real estate projects. We discussed with them 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 still 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.

Is there already property?

·      How long should the financing term be? 

·      Do I want to pay back the loan faster?

These are just three of many questions that we clarify with clients during our consultations in order to choose the best financing option. A major problem is the very different internal conditions and policies of banks, which make it very difficult for individuals to keep track 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 with one of the largest financial decisions.

WHAT TYPES OF FINANCING FOR PRIVATE PROPERTIES ARE THERE?

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 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 interest.

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

Here there are different options. Either you go directly to your house bank, apply there for the examination of the financing project, and then receive an offer. Or you go to a loan 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 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, so that the customers do not have to handle any unnecessary bureaucratic tasks. The documents are sent to the bank, and we receive a confirmation from the bank within 5-7 working days. After that, the purchase contract is created and sent to the bank so that the loan contracts can be prepared. We accompany our customers from the first inquiry to the handover of the keys. However, these two options do not exclude each other in any case. If customers have already been to 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 that must be considered in any financing. On the one hand, the ratio of the monthly loan payment to income, which may not exceed 40%. On the other hand, the equity ratio is a main criterion for banks. Due to a decree from the financial market authority, at least 20% of the property purchase price must be available in the form of equity. However, if one of these criteria cannot be met, banks have a so-called special quota of 20%, which allows customers to be financed even if they do not meet one of these criteria.

WHAT INTEREST RATE DEVELOPMENT STILL AWAITS US THIS YEAR?

We expect a slight increase in fixed interest rates in 2023. In 2024, they are expected to stabilize, which means that interest rates will remain at approximately the level of the end of this year. Variable interest rates will rise slightly again in July, and we also anticipate a slight increase at the next adjustment. Due to these developments, fixed interest rates are expected 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!