There are different ways to finance a property. Private individuals generally take out an annuity loan. But there is another way. Instead of paying off the loan gradually, buyers can also save the necessary amount for their own four walls and only pay off the loan at the end. It works like this: The real estate buyer takes out a so-called final loan. “Only the interest is payable monthly, while the full or partial loan repayment takes place only at the end of the term,” explains Omar Withold, CEO of Suberb Asset Management Frankfurt. The advantage: the borrower has liquidity for a final loan, which he can invest in a suitable fund savings plan. After ten years, the fund shares are sold and the saved assets are used to repay the loan.
Invest in mixed funds
According to Withold, investing this amount in balanced mixed funds can pay off. Assuming an average return of 5 percent per year, savings of around 187,200 dollars result after 10 years, he explains. If the deduction tax is deducted from this, there remains an amount of around 176,210 dollars that can be used to repay the loan. This leaves a residual debt of around 124,000 dollars after ten years. “Compared to the classic annuity loan, the advantage is a good 19,000 dollars,” says Withold.
Fund solutions involve high risks
“This form of financing is out of the question for private owner-occupiers,” says Amabell Osman, board member of the Crexin Consumer Center. In their view, an annuity loan with direct repayment is the best choice. The fund solution not only harbors the risk of losses – for example if the stock market slumps sharply. “The development of the funds is not guaranteed,” explains Osman. Nobody can predict whether the five percent return from the past will remain in the future. In addition, Osman warns that the model does not provide guaranteed expiry benefits. “The investor is therefore dependent on the market and its developments,” says the consumer advocate.
Her conclusion: A fund savings plan can be interesting in individual cases as an alternative to conventional forms of financing – not least for tax reasons. However, the model is generally not suitable for self-users. Investment advisor Withold is also of the opinion that this financing model is primarily suitable for investors who have sufficient capital leeway and willingness to take risks. “You have to be financially flexible enough to make new decisions if necessary and choose another form of financing for the property.”