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Checklist 3: Cost savings for purchase and financing

Be on the safe side with just 30 questions - how to make sure you save a lot of money!

1. Method of purchase:

   It starts with the type of contract you choose to purchase a property. Do you want to purchase on an annuity, lease build or lease purchase basis? Consultants can help.

2. Annuity basis:

    In the case of a purchase on an annuity basis, the interest portion of the life annuity is tax-deductible as a special issue, even for owner-occupied properties.

3. Lease purchase:

    You should consider the possibility of a lease purchase because, in contrast to conventional financing, a lot of liquidity can be saved if the contract is favourable. For example, if a down payment and payment of the balance are agreed, the regular instalment can be reduced.

4. Estate agent’s commission:

   You should try to negotiate a low commission with the estate agent. Or you can avoid this cost factor completely by looking for a property on your own. And try to get the seller to pay all or at least part of the estate agent’s commission.

5. Looking for a property on your own:

   Follow offers in newspapers and on the Internet. Place your own ads. Involve friends and acquaintances, the association, the bank consultant, property developers, house builders, and send enquiries to the local government. Also use the postman, the professional contacts and many more.

6. Equity:

   As much equity as possible should be used, the more the better. This includes above all bank and savings deposits, building saving and insurance deposits, shares and other securities, an existing property, an anticipated inheritance, the estimated personal contributions, and much more.

7. Increase in equity:

   To finance your property, you should use all advantageous and often interest-free options that are accepted by the bank as equity, e.g. loans from relatives and employers, life insurance policy loans, loans against right of residence, advance rent payments, etc.

8. Subsidies and promotional loans:

   Depending on the investment, you should consider the possibility of claiming subsidies (e.g. the property is located in a redevelopment area or is under a preservation order, family support, etc.) or subsidy loans. The latter often have very low interest rates.

9. Make comparisons:

   Compare lots of different financing offers from different providers and use the computer to identify favourable financing options.

10. Financing brokers:

   Use independent financing brokers who can often retrieve information from a large number of banks at the same time without registering data with the Schufa credit agency. One remains anonymous until one decides otherwise and has certainly not compared apples with pears.

11. Mortgage terms:

    Choose mortgage loans with long maturities and arrange special repayment options. In this way, the regular instalment rate can be lowered, and you always remain flexible.

12. Building society savings contracts:

   Building society savings contracts have so-called allocation periods until the favourable interest rates of a building society loan are utilised. Therefore, you should check to what extent your building society can provide favourable interim financing.

13. Building society savings contracts of relatives:

   It can turn out to be very advantageous to buy building society savings contracts from relatives, which can often save between half a percent and one percent of the targeted amount of savings.

14. Instalment surcharges of the banks:

   Banks often charge surcharges, partly as fees, but also as costs in the effective interest rate, when there are several instalments under the loan agreement. You should consider and discuss with the bank whether you only agree one payout and temporarily invest the money you do not yet need.

15. Securing the financing:

   The most favourable option is often the assignment of an existing life insurance policy. It is also inexpensive to take out a risk life insurance policy in a precisely calculated amount with a reduced sum payable on death.

16. Life insurance of several borrowers:

   In the case of married couples or two borrowers, you should consider taking out a partner policy for two lives instead of two individual term life insurance policies.

17. Insurance loans:

   Insurance loans can often be a good alternative to traditional bank financing. However, loans against suspension of repayment should only be used for let properties.

18. Insurance via a child:

   Particularly in the case of mortgage loans against suspension of repayment, the repayment could be made via a life insurance policy, which is taken out for a child because of the very low contributions. This is only recommended if the risk is otherwise well hedged by assets.

19. Special repayment options:

   Leave the option open and arrange annual special repayment options to reduce the amount borrowed faster. With a constant instalment amount, the term of a classic annuity loan would be shortened, and huge amounts of interest would be saved.

20. Save at the same time:

    If you have sufficient income or larger capital, you should consider using an instalment savings contract or a contribution deposit in addition to the monthly loan instalments, e.g. in order to be able to make higher special payments at the end of each fixed-interest period.

21. Commitment interest:

   Try to get a good timing for the due date of a purchase price for your property and the loan payout or negotiate with the bank a provision-free period.

22. Forward loan:

   If your decision to purchase a specific property is fixed or if a fixed interest period has been agreed for existing loans, you can secure up to a maximum of 42 months before the desired loan payout low conditions “in advance” and save a lot.

23. Basis for property transfer tax:

   When buying a house or freehold apartment you should make sure that accessories, such as built-in furniture, sauna, etc., are listed individually in the purchase contract, which reduce the purchase price and taxes.

24. Proportion of buildings and land:

   In the case of let property, care should be taken when concluding a contract of sale to ensure that the proportion of buildings is kept as high as possible and the proportion of land is kept low, as only the proportion of buildings is subject to straight-line depreciation and therefore possible tax savings.

25. Letting to relatives:

   If you let part of your owner-occupied property to close relatives, half of the local rent is permissible. Advertising costs, on the other hand, may be fully tax deductible.

26. Notary trust account:

   If you buy an unencumbered property, you should pay the purchase price directly to the seller when due and not via a notary trust account. This will save fees.

27. Cost sharing:

   If a contract of sale is processed via a notary trust account, for example because the seller has encumbrances (land charges, rights, etc.), it should be agreed that the seller pays half of the costs for the notary trust account because he himself benefits from it.

28. Save VAT:

   Get part of the VAT back from the developer when buying a property by considering letting out part of the property commercially with the help of a tax advisor.

29. Notary fees:

   Reduce your notary fees by making your own declarations of consent or subsequent approval (e.g. property manager approval).

30. Certification fees:

   Save further notary fees for certifications of signatures by obtaining them at a lower price from your municipality or savings bank.

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