Contact
Schedule an appointment now
address
Market Square 9
69469 Weinheim
69469 Weinheim
Opening hours
Mon. – Fri.: 10:00 – 20:00
Tailor-made solutions for investment, insurance and finance
Home financing and its combination with equity funds
Digital innovations - Tax-optimized investments - Individual consulting
Our partners
Thousands of euros in savings for property buyers
An advantageous option for property buyers with sufficient equity is to supplement their financing with Investments in funds. The Stiftung Warentest (German consumer organization) is investigating under what conditions this is financially worthwhile.
The era of low mortgage rates has come to an end, at least for now: Since the beginning of 2022, the average interest rate for real estate financing has risen by 2.5 percentage points. Currently, interest rates range from 4.1 to 4.5 percent effective, depending on the loan amount and the equity contributed. This development also impacts the conditions for prospective homeowners and builders. However, we remain at your side to ensure that your financing can be realized as planned.
Uncertain return prospects
It's important to remember that past returns are no guarantee of future performance. Additionally, homebuyers should be aware that they typically pay a higher interest rate on their mortgage if they invest part of their capital in funds instead of putting it into the property itself. Furthermore, borrowers pursuing this strategy accept a reduction in security in favor of the opportunities and risks of the stock market.
Consumer advocates therefore advise only entering into this financing model if the financing remains stable independently of the fund investments. This is the case if sufficient equity capital is available.
Lower equity increases borrowing costs
The reason for the consumer advocates' cautious approach is that lower equity leads to higher loan interest rates. With full financing of the purchase price, the interest rate would be approximately half a percentage point higher than the rate for 80 percent financing.
Long-term interest rate hedging is important
For homebuyers who want to combine a loan and funds, a long-term fixed interest rate is essential. A fixed interest rate for 20 years or for the entire term is recommended.
Even with such long-term commitments, borrowers have the option of full or partial termination after ten years from disbursement, with a notice period of six months.
With a fixed interest rate of 20 years, they would have almost ten years to profit from stock market highs, sell fund units profitably and use the proceeds to repay the loan.
Choosing the right investment product
ETFs that track a global stock index are particularly recommended for stock market investment. ETFs (Exchange Traded Funds) have low costs and are suitable for investors with limited stock market experience.
Broad diversification across various sectors and companies reduces the unavoidable price risk. The global MSCI World Index comprises over 1,600 companies from 23 countries.
Saving instead of full repayment
An alternative approach is to repay the loan more slowly, for example at only two percent instead of four percent. The difference can be invested in an ETF savings plan.
Here too, the fund investment should only serve as a supplement to loan repayment. However, in this case, banks require the ETF savings plan as security before granting the option of a repayment-free period. Investors then no longer have unrestricted access to the investment.