FINANCING OF PRIVATE REAL ESTATE

When financing a private property, many individuals seek support and advice to escape the banking jungle. Especially during times of rising property prices and stricter lending guidelines, it is often a major challenge to find the right financing solution. To shed light on this issue and to obtain valuable tips, we spoke with David Savasci, CEO of miracl, about real estate financing.

miracl has already supported many of 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 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?

There is no optimal financing that fits all customers. The best solution is always "tailored" and depends on various individual factors.

·      Are there already properties?

·      How long should the financing period be? 

·      Do I want to pay back the loan faster? 

These are just three of the many questions that we clarify with our clients during our consultation meetings in order to select the best financing option. A significant 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, extract the parameters for comparability, and provide assistance with one of the largest 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 and the current market situation, 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?

Here there are different options. Either you go directly to your house bank, apply for the review of the financing project there, 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 our clients. We then discuss the initial details and conduct an online consultation where we collaboratively 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 our clients do not have to deal with unnecessary bureaucratic tasks. The documents are sent to the bank and within 5-7 working days we receive an approval from the bank. Then the purchase agreement is created and sent to the bank so that the loan agreements can be drafted. We accompany our clients from the first inquiry to the handover of keys. However, these two options do not exclude each other in any case. If clients have already been to their house bank before contacting us, we can check the existing offer in just a few moments and give our assessment. 

WHAT CRITERIA ARE IMPORTANT TO OBTAIN FINANCING?

There are 2 criteria that must be considered for any financing. On one hand, the ratio of the monthly loan installment to the income, which must not exceed 40%. On the other hand, the equity ratio is a main criterion for banks. According 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 quota of 20%, which allows them to finance clients who do not meet one of these criteria.

WHAT INTEREST RATE DEVELOPMENTS LIE AHEAD OF US THIS YEAR?

For the fixed interest rates, we expect a slight increase in 2023. In 2024, they are expected to stabilize, resulting in interest rates remaining at approximately the level of the end of this year. Variable interest rates will rise slightly again in July, and 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 rates in the year 2023 (25-year term).

Thank you for the interview!