A property can currently often be financed cheaply. However, property prices have been on the rise for years. Therefore, more and more people are on the brink of whether they can still afford their own home and, for example, buy a house in Wiesbaden. It is, therefore, all the more important to keep the expenses related to real estate and financing as low as possible.
Rising real estate prices are causing more and more prospective buyers
Real estate prices in Germany have risen in some cases by more than 80 percent in the past ten years, as the well-known real estate agent from Wiesbaden Paul & Partner Real Estate knows. This applies in particular to large cities such as Berlin, Hamburg, or Munich. The situation has meant that fewer people tend to be able to afford their own four walls than was the case two years ago. It is, therefore, all the more important for prospective buyers to save costs elsewhere. In fact, there are a few ways you can, for example, reduce at least some costs when buying an apartment in Wiesbaden, although not necessarily the purchase price of the respective property.
Various savings options around real estate acquisition
In the following article, we would like to deal primarily with how you could save some costs that arise in connection with the acquisition or construction of a property. In the overview, we take a closer look at the following savings options:
- If possible: Choose a state with a lower real estate transfer tax
- Own work on construction
- Integrate equity into the financing
- Compare mortgage offers
In the following sections, you will find out what is hidden behind the respective points.
If possible: Choose a state with a low real estate transfer tax rate
A first saving possibility concerns the additional purchase costs, namely the real estate transfer tax rate. As is well known, new property owners in every state have to pay a real estate transfer tax. However, the tax rates differ depending on the federal state, as the real estate agent Paul and Partner repeatedly point out. Of course, this saving potential only exists if you can choose a little more freely in which state you will buy a property. If this is the case, there is a maximum savings potential of three percent at this point if we compare the federal states with the highest and the lowest real estate transfer tax rates.
Based on an exemplary purchase price of EUR 250,000, you could save EUR 7,500 in costs. The following overview shows which real estate transfer tax rates apply in selected federal states:
- Bavaria: 3.5%
- Baden-Württemberg: 5.0%
- Hesse: 6.0%
- Mecklenburg-Western Pomerania: 6.0%
- North Rhine-Westphalia: 6.5%
- Thüringen: 6,5%
Own work on construction: Potential savings when building a property
Another cost-saving option is related to the construction of a property but does not exist if you want to buy a house in Wiesbaden, for example. You can save a considerable amount of money by doing your own work on the building, such as laying tiles, painting, or installing sanitary facilities. You save the craftsmen for the corresponding work and can thus reduce your expenses. In addition, you have the option of having your own contributions credited to a certain percentage as equity and perhaps being offered a lower interest rate on this basis.
Equity in construction finance can reduce interest costs
Another option of how you can save costs around your new property is equity. This is already required by numerous banks that provide a real estate loan. A comparatively high equity ratio has several advantages for you, namely:
- Better chance of loan approval
- More stable funding
- Lower building rates
- Lower monthly credit rate
From a financial point of view, the higher equity ratio has the main advantage that banks grant a cheaper building rate if a relatively large amount of equity can be involved in the financing. From the bank’s point of view, this reduces the credit risk, which is rewarded with a lower interest rate. If we compare a mortgage with and without equity, there is definitely potential for savings in interest costs of between 0.8 and 1.5 percent. Based on the exemplary loan amount of 250,000 euros, you could save up to around 3,500 euros in annual interest costs by integrating equity into real estate financing. The experienced broker from Wiesbaden, therefore, advises Paul & Partner to achieve a higher equity ratio if possible.
It is imperative to compare bank loan offers
Another possibility, such as how you can reduce expenses when buying real estate in Wiesbaden, is again related to mortgage lending. It is important that you compare as many loans offer as possible. The interest rates of the banks seem to be relatively close to each other, but there is still considerable savings potential. This results from the fact that with a construction loan there are always high loan amounts and long terms. For example, if you have two loan offers and the difference in the interest rate is only 0.4 percent, you can still save EUR 400 in interest costs each year for every EUR 100,000 loan amount in the first few years.
Save costs with particularly cheap loans
Another option of how you can save money in connection with buying property or building a house is to opt for particularly cheap loans. This does not mean the classic annuity loans, because we already pointed out in the last section the comparison of the offers and the associated savings in interest rates. Rather, it is about looking for other loan options or, for example, has signed a home savings contract in a good time.
Then you can include the low-interest home loan in the financing. In addition, several KfW funding programs are available, which may also be suitable for you. On the one hand, you benefit from a particularly low-interest promotional loan and maybe even receive a grant from KfW because you are building an energy-saving house. If you are unsure which loan options exist on the market, you can also consult professional real estate agents like Paul and Partners on this topic.
In summary, there are several ways you can reduce expenses related to your property. If we take all of the above-mentioned savings options together, it is by no means unrealistic that you can save several thousand euros in costs over a year.