Financing: buying, renovating or building property?in times of high interest rates

The high interest rates are becoming entrenched. How much longer should you wait to realise your dream of home ownership and/or an upcoming renovation? Now that property prices have fallen nationwide, the prospects for prospective buyers are slowly improving.

Over the past ten years or so, property prices have become prohibitively expensive for many potential buyers. This was also due to the fact that the financing conditions were temptingly favourable. Now the situation has reversed: property prices have fallen in many places, but financing has become expensive.

Such a situation has often occurred in the past, for example before and after the turn of the millennium. Even today, some people still rave about the cheap property prices at that time and forget how high the interest rates for building loans were back then - namely around ten per cent. With a little distance, the current situation does not look so bad for prospective property buyers. So it makes sense to look around for affordable homes now and take on financing that seems expensive in order to refinance later.

Stiftung Warentest has investigated whether this can work. Younger people in particular usually do not have enough equity to pay 20 per cent of the purchase price and all ancillary costs. This requirement is still considered the standard for solid financing. Often the entire equity is already used up for property purchase tax, estate agent and notary. So it sounds tempting to take the risk of financing a property with little or no equity. Most banks nowadays offer such full financing if the income is right. However, borrowers take on a higher risk and are asked to pay a lot.

In order to keep the monthly burden as low as possible despite higher interest rates, many borrowers choose a lower initial repayment - this trend has continued since the end of the low-interest phase. If you want to save on the purchase price of a house or flat, older properties are the first choice, but you also have to factor in the costs of renovation. 80 percent of those surveyed want to commission tradesmen to modernise their property. Just under two thirds plan to help out themselves, and almost half of them will be supported by their family.

(Photo: Arek Socha, Pixabay)