FINANCING OF PRIVATE REAL ESTATE

When financing a private property, many people wish for support and advice to escape the banking jungle. Especially in times of rising real estate prices and stricter lending guidelines, it is often a great challenge to find the right financing solution. To bring some clarity and to receive 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 discussed with them the current developments in the real estate market, the different 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 offers 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? 

·      Do I want to pay back the loan faster? 

These are just three of many questions that we clarify with our clients during our advisory conversations to select the best financing option. A major issue is the very different internal conditions and policies of banks, which make it very difficult for individuals to keep track and compare the offers. With the help of our software, we can easily create an overview and extract the parameters for comparability, providing assistance in 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. In addition, the term of the financing can be adjusted, which can last up to 35 years. There is also the possibility of a mixed financing, in which, 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 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. Subsequently, we 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 required documents for the bank, so that the customers 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. After that, the purchase contract is created and sent to the bank so that the loan agreements can be prepared. We accompany our customers from the first inquiry to the handover of keys. However, these two options do not exclude each other in any case. If customers have already been to their home 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 FUNDING?

There are 2 criteria that must be considered in any financing. On one hand, the ratio of the monthly loan payment 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 contingency 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, they are projected to stabilize, which means that rates will remain at approximately the level of the end of this year. Variable interest rates will experience another slight increase in July, and we also expect a small rise 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!