Inflation and rising prices: How to finance a property now

The inflation rate is rising. While it was thought in August that the peak of 7.9 percent had already been reached, October proved otherwise. The inflation rate in Germany is now ten percent, and in the euro zone it is as high as 10.7 percent - and rising. The high costs are not only noticeable in energy and building materials, but also in construction financing. Are you wondering what you should currently look out for when financing a property? We explain it to you in this post.

Choosing the right financing

If you want to realize your dream of owning your own home, you generally have the choice between a loan with a variable interest rate or an annuity loan with fixed loan installments. The advantage of the second option is clear: your bank or lender cannot suddenly raise interest rates, as is the case with variable-rate loans. If you conclude a particularly long fixed interest rate agreement of at least 15 years, you can safely calculate your costs for the next period and will not experience any nasty surprises.

In the best case, your construction financing will even benefit from inflation as your loan debt devalues. This means that you pay back less than you received. However, this calculation only works if, for example, your income increases or your cost of living decreases at the same time.

Contribute more equity

Due to the rise in interest rates, construction financing is now up to 50 percent more expensive than at the beginning of the year. This also means that the banks’ requirements for their borrowers are changing. The more equity you bring, the higher your chances are that the bank will approve your loan request. At the same time, you reduce the monthly interest or pay off the property faster. As a rule of thumb, you should contribute at least 20 percent equity and also set aside a mid-five-figure amount for incidental purchase costs.

How to make the dream of a house come true despite inflation

The right real estate financing is the be-all and end-all in times of inflation and rising prices. To keep your financial burden as low as possible, you should forego renovation and modernization work that is not urgently necessary and use this money for financing.

You have questions about the topic? We are happy to assist you with our expertise. We also maintain a network of qualified financial experts who will work with you to find the ideal financing. Feel free to contact us with your request.

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