FINANCING OF PRIVATE REAL ESTATE

When 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 is often a significant challenge to find the right financing solution. To shed light on the matter and gain 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, various financing options, and important factors such as equity, interest rates, and repayment.

Whether you already have a property in mind or are 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.

Is there already real estate?

·      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 consulting sessions 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 in one of the biggest financial decisions.

WHAT TYPES OF FINANCING FOR PRIVATE REAL ESTATE ARE THERE?

There are variable and fixed-rate financing options. The advantages and disadvantages of these two options depend on the customers' situation as well as the current market conditions and are very individual. Additionally, the term of the financing can be adjusted, which can last up to 35 years. There is also the option 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 available. Either you go directly to your house bank, request a review of the financing project there, and then receive an offer. Or you go to a loan broker like miracl. We compare all well-known 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 jointly 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 customers do not have to deal with unnecessary bureaucratic tasks. The documents are sent to the bank, and within 5-7 business days we receive a commitment from the bank. Subsequently, 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 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 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 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 markets 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%, allowing them to finance customers who do not meet one of these criteria.

WHAT INTEREST RATE TREND AWAITS US THIS YEAR?

For fixed interest rates, we expect a slight increase in 2023. In 2024, they are expected to stabilize according to our assessment, which means that interest rates will remain roughly at the level of the end of this year. The variable interest rates will rise slightly again in July, and we also expect a slight increase in the next adjustment. Due to these developments, the fixed interest rates are expected to remain below the variable rates in the coming years.

The following graphic illustrates the development of fixed interest rates in the year 2023 (25 years term).

Thank you for the interview!