FINANCING OF PRIVATE REAL ESTATE

When financing a private property, many people seek support and advice to escape the bank 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 numerous clients in financing their real estate projects. We discussed the current developments in the real estate market, the various financing options, as well as important factors such as equity, interest rates, and repayment.

Regardless of 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?

The optimal financing that works for 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 clients during our advisory conversations to select the best financing. A major issue is the very different internal conditions and policies of 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 and extract the parameters for comparability, providing assistance in 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 customer's situation as well as 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 option, 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 for the examination of the financing project there, and then receive an offer. Or you go to a credit broker like miracl. We compare all renowned banks and automatically search for the best offer for the customers. We then discuss the initial details and conduct an online consulting conversation, 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 documents for the bank, so 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 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 the 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 check the existing offer in just a few moments and provide our assessment. 

WHAT CRITERIA ARE IMPORTANT TO OBTAIN FINANCING?

There are 2 criteria that must be considered for any financing. On one side, the ratio of the monthly loan payment to the income, which must not exceed 40%. On the other side, the equity ratio is a key 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 TREND AWAITS US THIS YEAR?

For fixed interest rates, we anticipate a slight increase in 2023. In 2024, we expect them to stabilize, meaning the rates will remain 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 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 years term).

Thank you for the interview!