FINANCING OF PRIVATE REAL ESTATE

When financing a private property, many individuals seek support and advice to navigate the banking jungle. Especially during times of rising property prices and stricter lending guidelines, finding the right financing solution can often be a significant challenge. To shed light on this topic and receive valuable tips, we spoke with David Savasci, CEO of miracl, about property 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 various 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 provides 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 repay the loan faster? 

These are just three of many questions that we clarify with our clients during our consultations in order to select the best financing. A major issue is the very different internal conditions and guidelines 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 biggest financial decisions.

WHAT TYPES OF FINANCING FOR PRIVATE REAL ESTATE ARE THERE?

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. In addition, 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?

There are different options available. Either you go directly to your local bank, apply for an assessment of the financing project, and then receive an offer. Or you can go to a loan broker like miracl. We compare all reputable banks and automatically look for the best offer for the customers. 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 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 confirmation from the bank. After that, the purchase agreement 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 the keys. However, these two options do not exclude each other in any case. If customers have already been to their local 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 FUNDING?

There are 2 criteria that must be considered in every financing. On one hand, the ratio of the monthly loan installment to income, which must not exceed 40%. On the other hand, the equity ratio is a main criterion for banks. According 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 contingent of 20%, which also allows financing for customers who do not meet one of these criteria.

WHAT INTEREST RATE DEVELOPMENTS AWAIT 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, meaning that 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 anticipate a slight increase at the next adjustment. Due to these developments, fixed interest rates are expected to remain lower than variable rates in the coming years.

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

Thank you for the interview!