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 this topic 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, as well as important factors such as equity, interest rates, and repayment.

Whether you already have a property in mind or are just 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 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 our clients during our consulting sessions to select 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 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 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 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 last up to 35 years. There is also the possibility of a mixed financing, for example, where 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. You can either go directly to your home bank, apply for the evaluation of the financing project, and then receive an offer. Or you can go to a loan broker like miracl. We compare all major banks and automatically look for the best offer for the clients. We then discuss the initial details and conduct an online consultation where we collaboratively 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 the clients don’t have to handle unnecessary bureaucratic tasks. The documents are sent to the bank, and we receive a positive response from the bank within 5-7 business days. Following that, the purchase contract is created and sent to the bank so that the loan contracts can be drafted. We accompany our clients from the first inquiry to the handover of the keys. However, these two options do not exclude each other in any way. If clients have already been to their home 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 any financing. On one side, the ratio of the monthly loan payment to the income, which may not exceed 40%. On the other side, 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 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 allows them to finance customers who do not meet one of these criteria.

WHAT INTEREST RATE DEVELOPMENT AWAITS US THIS YEAR?

We expect a slight increase in fixed interest rates in 2023. In 2024, they are likely to stabilize, meaning that interest rates will remain at about 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 expected 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!