This is how much equity you need for your dream property!

This is how much equity you need for your dream property!

Financing a property is a complex process that requires precise calculations. Loan amounts depend heavily on the banks' conditions, especially on interest rates and repayment requirements. Property buyers must expect that the majority of financing will be via annuity loans. These loans consist of regular annual payments that include both interest and repayment components.

The remaining debt on the property decreases over time, and the principal and interest payments are calculated so that the total burden remains constant. An example makes this clear: With an interest rate of 4% and a minimum repayment of 2%, the annuity is 6%. With an annual income of 18,000 euros, a maximum loan amount of 300,000 euros could be possible, based on the calculation of 18,000 divided by 0.06.

The influence of interest and repayment

The ratio between interest and repayment has a significant influence on the amortization period of the property. Lower repayment extends the repayment period, while a recommended repayment of at least 2-3% per year can help pay off the loan by retirement. When it comes to paying off a real estate loan, the rule of thumb is that it should take a maximum of 30 years.

When planning, not only the loan costs should be taken into account. The additional acquisition costs, which usually amount to between 10 and 15% of the property costs, must also be taken into account. In Bavaria these are around 5% without brokers. It is advisable to cover these additional costs with equity in order to minimize the risk for the bank. Property buyers should also consider reserves for possible renovations, which are estimated depending on the region and condition of the property.

Calculation of equity and total costs

An example of financing a property that is expected to cost 450,000 euros shows that the estimated expenditure for a new kitchen and furniture could be around 10,000 euros. In addition, around 45,000 euros must be budgeted for additional acquisition costs (10%). Together, this results in a required equity capital of 55,000 euros, and an additional 150,000 euros are required, which cannot be covered by a loan. A total of around 205,000 euros in equity is required to finance the property with an area of ​​120 square meters.

A tool that is too helpful in this process is the loan calculator, which allows analyzing various parameters. Users can calculate repayment rates, terms and interest rates, among other things. The loan calculator also displays detailed repayment plans that list annual debt balances and payments and help keep track of your finances. An example from such a calculator presents a monthly installment of 306.49 euros and total costs of 11,033.64 euros with an effective annual interest rate of 6.697% p.a. for an accepted loan.

In summary, the successful financing of a property requires precise planning and comprehensive knowledge of all steps, from the loan amount to additional costs. In order to avoid possible mistakes, potential buyers should inform themselves and, if necessary, seek support from experts.

For more information on the details of real estate financing, please visit flz.de and for precise calculation of credit options zinsen-berechner.de.