FINANCING OF PRIVATE REAL ESTATE

Many people seek support and advice when financing a private property to escape the banking jungle. Especially in times of rising real estate prices and stricter lending guidelines, it is often a significant challenge to find the right financing solution. To shed some 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 spoke with them about the current developments in the real estate market, the various 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 fits 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 consultation sessions in order to select the best financing option. A big problem is the very different internal conditions and policies of banks, which make it very difficult for individuals to maintain an overview and compare offers. With the help of our software, we can easily create an overview and extract the parameters for comparability, providing assistance with one of the most financially significant 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 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 be up to 35 years. There is also the possibility of 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?

Here there are different options. Either you go directly to your bank, apply for the review of the financing project there, and then receive an offer. Or you go to a credit broker like miracl. We compare all reputable banks and automatically search for the best offer for the customers. We then discuss the first 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 documents for the bank, so that customers don’t 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 agreement is created and sent to the bank so that the loan agreements can be prepared. We accompany our customers from the initial 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 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 in any financing. On one hand, the ratio of the monthly loan payment to the income, which may not exceed 40%. On the other hand, the equity ratio is a main criterion for banks. Due to a directive 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 also allows for financing 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, we anticipate they will stabilize, meaning interest rates will remain at around the level of the end of this year. Variable interest rates are expected to rise slightly again in July, with a further slight increase anticipated 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 2023 (25 years term).

Thank you for the interview!