Six Strategies to Achieve the German Dream: Owning a Home
Yearning for a Place to Call Your Own?
For many Germans, owning a home is a long-held dream. Yet, it often seems unattainable due to rising real estate and construction costs, financing rates, and other financial roadblocks. Don't let these challenges deter you! Here are some tried-and-true strategies that can help you successfully purchase a home.
Embrace Ownership
Motivated by both personal well-being and social prestige, the desire for home ownership is deeply ingrained within us. A study showed that young people, in particular, prefer to stay mobile and rent, rather than commit to a mortgage and sacrifice their mobility. However, for those who are truly set on home ownership, it's crucial to be honest about your motivations and carefully consider your life plans. Be prepared to make some compromises, whether it's giving up extravagant hobbies or multiple vacations.
Maximize Your Hidden Reserves
Don't let the equity hurdle discourage you from owning a home. Here are some tips to fill those financing gaps with minimal effort:
Strategy 1: Consider taking out a small loan against your building society contract. This can yield several thousand euros, depending on the contract. Typically, banks grant loans of 60 to 80% of the saved balance, as long as the building society contract has been saved for some time. This option allows you to achieve a better position with first-ranking financing banks and secure better conditions.
Strategy 2: Use your parents' land charge. If they have already paid off their property but the land charge still exists in the land register, you can tap into it to help finance your own home. By transferring the land charge, you can save the costs of a new land charge, although parents would also be liable if the financing of their children fails.
Strategy 3: Use the Riester contract to your advantage. Withdraw funds from your existing Riester contract for purchasing or building your own self-used property. Withdrawals from Riester contracts are tax-free, and the contract continues to run. This option is often overlooked due to a lack of awareness.
Strategy 4: Shop around for the most favorable bank criteria for setting and evaluating equity. Each bank operates with its own criteria, so comparisons and consultations are essential. Asking family members for support can also be a game-changer.
Strategy 5: Combine the strategies mentioned above, as the impact on financing varies for each situation.
Leverage Personal Assets
When checking your income, financial institutions often use flat rates for living expenses and ancillary costs. To improve your chances of securing a loan, it's crucial to prove your financial stability. Obtain a financing certificate, which confirms your creditworthiness, and establish personal contacts with brokers early on. Not only does this give you a chance to be called before properties even go online, but it also makes you more attractive to brokers and increases your chances of viewings.
Embrace the Simplified Route
Consider buying an existing home instead of new construction, especially if it has a renovation backlog. You can negotiate the purchase price and raise the basic level of the house step-by-step as your finances allow. Tapping into personal connections and using self-help can help reduce construction costs. It's better to have a more modest home with sufficient capital and amortization than a high-end property that requires a significant financial burden.
Explore Alternative Solutions
Sometimes, being creative with your housing arrangement can help you achieve home ownership. Perhaps you could consider building groups for families, tiny houses for singles, or moving to the countryside and engaging in a house swap deal with senior homeowners interested in a change. Making small sacrifices can ultimately lead to a better long-term financial future.
- Recognizing the significant role of financial management, one should explore various employment policies that could potentially increase income, such as community policy or investing in a side job related to home-and-garden or real-estate.
- To make significant financial improvements and increase savings for home ownership, it's important to live a lifestyle that prioritizes financial stability, perhaps by cutting back on luxuries or multiple vacations.
- After achieving financial stability and securing a home, one could consider employing others as renters or tenants to generate passive income, aligning with the successful employment policies of property management.
