Real estate financing: Where does the equity come from?
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Home ownership is less successful for the younger generation than for earlier generations. This is mainly due to the constantly rising real estate prices. A recent study has investigated how the purchase of real estate can nevertheless succeed and where the equity capital comes from.
According to a representative survey by Dr. Klein Privatkunden AG, almost half (46 percent) of the property owners who bought their own home in the past three years were between the ages of 18 and 39. At this age, there is usually not yet much saved money available because of the longer education periods. However, savings as equity capital play an important role in financing, although their significance is declining. More than ten years ago, 74 percent of those surveyed said that their equity came from savings. In the past three years, this figure was only 68 percent and is shifting to other sources of finance. Money from inheritances plays a more important role than before. More than ten years ago, the equity share from inheritances was seven percent, in the past three years it was already 13 percent. Family support is becoming more important. More than ten years ago, 17 percent of buyers were supported by their family. In the past three years, this figure has risen to 25 percent.
Parents can use their own, preferably paid-off property for the capital injection to the children, for example by having a security mortgage entered in the land register or by taking out their own loan. Government subsidies - from KfW to state subsidies - are also taken into account by some banks as part of the equity capital. If you are handy, you can also take out the so-called muscle mortgage as your own contribution and thus as equity capital. However, its share has fallen from 20 percent more than ten years ago to 13 percent in the past three years.
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