From flagship product to obsolete model: the home loan and savings contract has experienced both. It used to be an attractive way of combining real estate financing with a savings contract and securing a low-interest loan – including government subsidies. However, in the ongoing low-interest environment, the home loan and savings contract had lost this aura and advantage. But since last year, interest and new business have been picking up again. The demand comes from both municipalities and private individuals.

At the same time, there is a trend towards higher financing tariffs. The reason is obvious: “At the beginning of 2022, building interest rates quadrupled from around 1 to around 4 percent. This made many people realize how important interest rate hedging is,” says Christian König, Managing Director of the Association of Private Building Societies (VDPB). “With building societies, you can still secure interest rates between 1.5 and 2.5 percent today.” And there is calculation certainty on top.

The debate about the heating law is also giving providers of home loan and savings contracts a boost: “Politicians are now providing a further driver with refurbishment and conversion obligations, because the energetic condition of a property is increasingly becoming a value-determining factor in the transfer of ownership,” says König. “Here, the home savings contract offers itself as an energy saving contract.”

If you are interested in a home savings contract, you should obtain various offers. Because the conditions of the individual institutes sometimes vary enormously, as Natalie Wagner, a specialist in construction financing at the credit broker Dr. Klein in Starnberg: “The Bausparkassen differ in their offers not only in terms of interest rate, but also in many structures and framework conditions such as the allocation maturity.” Against this background, those interested in building savings should pay particular attention to two things when concluding a contract: First, they should be clear about the purpose for which they need the building society contract. Secondly, choose the specific savings amount carefully – because this cannot be increased after the contract has been signed if the tariff no longer exists. “I therefore advise setting the sum a little too high rather than too low – it is still possible to reduce the sum after the contract has been signed, but only to a limited extent to increase the amount,” says Wagner.

Even if it takes an average of eight to ten years before the loan is ready for allocation and before home savers can use their savings plus the agreed loan: there is no fixed term for home savings contracts. The timing of the allocation maturity depends on the payments made and offers a corresponding amount of flexibility. “The home saver can adjust his savings rate if necessary or even suspend it. Home savings loans can be used sooner or later. In addition, free special repayments are possible here at any time,” says VDPB Managing Director König. With these it is possible to accelerate the allocation maturity.

In addition to interest rate security, the high degree of flexibility is the greatest advantage of a home loan and savings contract – and can also be played off in the purpose of use. “The loan is not tied to any specific property, and even if follow-up financing was originally intended, it can easily be used for modernization,” explains construction financing expert Wagner. A carport can be financed with a home savings contract just as much as a garage or a fireplace – and even completely different purposes such as buying a car or a trip are de facto possible. Because you can simply have a home savings contract paid out when it is due and invest the sum elsewhere – without taking out the loan. However, if the money is used for ‘non-residential purposes’, all state subsidies such as the housing construction premium, employee savings allowance (VL) or residential Riester do not apply.

Of course, the flexibility of the home savings contract has its price. On the one hand, the credit – i.e. the amounts saved – earns low interest. The home loan and savings contract is therefore not suitable as a savings investment. In addition, at the beginning of the contract, a commission is charged, which is deducted from the first deposits. On average, this is 1.0 to 1.6 percent of the total home savings sum and causes home savers to slide into the red at the beginning of the contract period. It can sometimes even take years before the actual deposit is made – depending on the amount of the deposit chosen. In any case, savers need staying power before the allocation is ready. Early termination of the contract is possible, but not advisable because of the high initial costs.

There is no general answer as to whether a home loan and savings contract is the best choice. In any case, it offers the opportunity to secure the low interest rates of the building societies in the long term and promotes planning. From January 2024, Wohn-Riester can also be used for energy-related renovations.

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