FINANCING OF PRIVATE REAL ESTATE

When it comes to financing a private property, many people seek support and advice to escape the banking jungle. Especially in times of rising property prices and stricter lending guidelines, it often becomes 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 many of our clients in financing their real estate projects. We talked with them about the current developments in the real estate market, the different financing options, and 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 dependent 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 consulting conversations in order 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 and provide assistance with one of the financially largest decisions.

WHAT TYPES OF FINANCING FOR PRIVATE REAL ESTATE 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, 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?

There are different options available. Either you go directly to your house bank, apply there for an assessment of the financing project, and then receive an offer. Or you go to a loan broker like miracl. We compare all major banks and automatically look for the best offer for our clients. We then discuss the initial details and conduct an online consultation, where 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 paperwork for the bank, so 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. Afterwards, the purchase contract is drafted and sent to the bank so that the loan contracts can be created. We accompany our clients from the initial inquiry to the handover of the keys. However, these two options do not exclude each other in any case. If clients have already visited their house bank before contacting us, we can quickly review the existing offer 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 may be a maximum of 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 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 clients 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 expected to stabilize, with 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 interest rates in the year 2023 (25-year term).

Thank you for the interview!