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 real estate prices and stricter lending 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 spoke with them about the current developments in the real estate market, the various financing options, and important factors such as equity, interest rates, and repayment.

Whether you already have a property in mind or are still in the early stages 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?

·      Do I want to repay the loan faster? 

These are just three of many questions that we clarify with our clients during our consultations to choose 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 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 most financially significant decisions.

WHAT TYPES OF FINANCING FOR PRIVATE REAL ESTATE EXIST?

There are variable and fixed-rate financings. 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, 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 options. Either you go directly to your house bank, apply there for the review 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 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, which means that customers do not have to handle unnecessary bureaucratic tasks. The documents are sent to the bank, and within 5-7 working days, we receive an approval from the bank. After that, the purchase contract is drafted and sent to the bank so that the loan agreements can be created. We accompany our customers from the first inquiry to the handover of keys. However, these two options do not exclude each other in any way. If customers have already been to their house bank before contacting us, we can review 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 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. 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 quota of 20%, which allows customers to be financed even if they 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, they are projected to stabilize, meaning that interest rates will remain roughly at the level of the end of this year. Variable interest rates will rise slightly again in July, and we also expect a slight increase in 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!