The Right Process for Financing Real Estate (2024)
This guide refers to German law and the German tax system. It is a translation of our German original and does not replace individual tax or legal advice.
Current developments on the property market confront many investors with the challenge of obtaining high-yield real estate financing. Besides rising interest rates, the reason lies in the hurdles set by banks, which turn down financing where documents are incomplete or creditworthiness is weak. For this reason, we explain what you should bear in mind when financing property and which criteria currently need to be met. We also present a way to significantly improve your chances of buying your property. This gives you the option of benefiting from the advantages of buying property despite current interest rate developments.
Neo Capital supports high-net-worth individuals and investors in building real estate portfolios with attractive returns and in converting tax liabilities into private wealth. To this end, we advise our clients comprehensively on the financial and tax structuring of their assets and identify lucrative investment opportunities. On real estate financing, we advise numerous prospective buyers every day, taking into account their individual situation and the current opportunities on the property market. Take advantage of our advice and see for yourself what our independent experts in finance, real estate and retirement planning can do for you.
Real estate financing for your own home and for investment
In recent months, banks' interest rates and terms have risen sharply. Particularly without the support of the Kreditanstalt für Wiederaufbau (KfW, the German state-owned development bank), the monthly instalment for new investments is climbing to barely sustainable levels. Anyone wishing to continue obtaining real estate financing, construction financing or their existing property loan on sustainable terms should pay attention to various factors when preparing the application. Alongside your creditworthiness, the top priority is the availability of reliable information about your property. While all documents are prepared for off-market deals and properties brokered by financial advisers, financing requests often fail in the case of freely advertised properties. Depending on the type of offer, a repayment schedule is often available, which in turn makes the request to the bank considerably easier. Besides creditworthiness and the quality of the documents, the range of offers in particular is decisive for objectively the best real estate financing. With just one offer from your house bank, it is often impossible to get a sufficient view of the market, which means terms cannot be compared. The interest rate can quickly appear excessive, which would not happen with an independent comparison of several providers. With sufficient planning, the same request for terms should therefore be placed with as many providers as possible. Anyone who does not want to waste time here can rely on advice from independent experts. Compared with the house bank, ideally all providers are compared here without having to explain your request anew to each bank.
Affordably financed property through expert advice
Looking at the costs of a property, it quickly becomes clear that the purchase price is split between equity and borrowed capital. The equity, usually 10 to 20 per cent of the purchase price of a property, covers the incidental purchase costs and reduces the monthly instalment. Anyone who can already finance this through the rent from the purchased property benefits fully from the attractive opportunities of the property market. For this step to work, investors must be able to rely on the most attractive real estate financing possible. Only those servicing an affordable loan can generate an optimal return from the difference to their income. The route to as many offers as possible often leads, via the correct preparation of documents, to a provider's online financing calculator. Often only a few truly independent rates are compared there, which makes individual advice indispensable for objectively the best property loan. Turning to an expert also opens up access to an extensive selection of off-market properties. These properties are characterised by an excellent return despite a difficult interest rate policy. Anyone wishing to align their real estate financing with the best possible return should not overlook this option.
Neo Capital: independent advice drawing on more than 500 lenders
For many investors, real estate financing does not begin at the bank: rather, an intensive development of their own strategy, a comparison of various offers and consideration of their own situation and resources are necessary. Anyone without experience in calculating their return comprehensively can create far-reaching problems with the wrong real estate financing. The correct approach should therefore always be to consult an independent adviser when planning your real estate financing. Only in this way can the documents on the property and on your creditworthiness be optimally prepared, increasing the chances of a loan with attractive repayment terms. Without the right property loan, on the other hand, even the most attractive property can become an expensive burden with years of lost profit. As independent financial experts, we support you in financing your own property as well as properties from our off-market portfolio. We advise you individually and are at your side at every stage until the purchase is completed. We plan your project in coordination with your tax adviser and with access to our network of more than 500 banks and lenders. This saves you time and helps you avoid sometimes unfounded rejections from your house bank. With years of experience, our advisers come straight from practice and are experts in structuring and implementing tax-optimised real estate financing. Feel free to contact us at any time — we will accompany you on the way to the right property loan.