The KfW “Home Ownership for Families” (WEF) program has been running since June. But because it was unattractive for many families and they hardly bought it, the state development bank had to make additional adjustments. KfW is now offering real estate funding with new conditions.
The program is intended to enable families with children to own a climate-friendly home by providing them with significantly cheaper loans than those currently available on the market. Families and single parents in both rural and urban areas can use the loan because it applies to the first purchase or construction of a house or condominium.
The changed conditions of the WEF program are one of the measures that the federal government decided on at its construction summit in mid-September. The main reason was the low number of applications: at the beginning of August only around 100 families had applied for the loan.
The amount of funding still depends on income, the number of children and the energy standard of the property. Previously, families with one child under 18 and a taxable annual income of 60,000 euros were able to apply for the loan. This limit has been raised and is now 90,000 euros, meaning more families are eligible for funding. With each additional child, the income limit increases by 10,000 euros.
The maximum loan amounts also increase by up to 35,000 euros. They depend on the taxable household income. For example, anyone who chooses the “climate-friendly residential building” funding level and has one or two children will receive a maximum of 170,000 euros. Families with three or four children can get a loan of up to 200,000 euros. From five children onwards, the maximum funding increases to 220,000 euros.
Anyone who adheres to an even stricter energy standard for their property also gets more money: In the “Climate-friendly residential building with QNG” funding level, applicants with one to two children receive a maximum of 220,000 euros as a loan, and for three to four children there is a maximum of 250,000 euros. Anyone who has five children or more can expect a maximum funding amount of 270,000 euros.
The condition for both funding levels is that the property complies with the EH40 energy standard and is not heated with oil, gas or biomass.
The interest that families have to pay for the KfW development loan starts at 0.01 percent effective annual interest rate for a climate-friendly new building. When it comes to financing, those receiving funding can choose between two options:
The first option is the so-called annuity loan. In the first few years, families only pay the previously agreed interest, then a monthly amount made up of interest and repayment. How high the interest rate depends on the loan term and the repayment periods. The loan term is between four and 35 years. The loan must be repaid after one year at the earliest and after five years at the latest. The fixed interest rate is ten years.
Example: With a loan term of eleven to 25 years and a grace period of up to three years, the effective annual interest rate to be paid is 0.33 percent. This is a clear difference from the usual market interest rates, which are currently three to four percent.
The second financing option is the so-called bullet loan. Borrowers only pay the interest during the entire term and then repay the entire loan amount in one lump sum at the end. You can choose between four and ten years for terms and fixed interest rates. The effective annual interest rate is set at 0.75 percent.
The funding amount will be paid out immediately and in full upon request, but can also be accessed in tranches. Only those who do not yet own a home in Germany and live in the property themselves are eligible for funding. The decisive factor for approval is the situation on the day the application is submitted, which means: While families whose child turns 18 on that day still receive the funding, those whose children are born after that do not receive it.
Borrowers can repay the entire outstanding loan amount early, but they will then have to pay a fee (so-called prepayment penalty). A partial refund is not possible.
Anyone who has already received building child benefit is excluded from the funding. Anyone who already owns a property is also not eligible for funding – no matter how big it is.
Anyone who uses it for debt restructuring and wants to use it to replace an existing building loan does not need to apply for the loan. KfW does not support this. The development bank also rejects those who want to use the loan for additional financing because, for example, a construction project that is already underway is more expensive than planned. And it does not support the purchase of land through the WEF program.
Note: This article was first published by our colleagues at CAPITAL.
