Buying a house or an apartment

Image of a stone figure that looks as if he himself were a house

Buying a plot of land, a house or an apartment (real property) may be the biggest purchase of our life.

There are many things to think about. If you are considering buying real property, you should not only carefully examine the property in question, but also look into alternatives and ask yourself the following questions: Is renting an option for me too? How else could I invest the money I am about to invest in the property?

Based on an overview of all your financial reserves and a budget plan for your household, you should first consider how much money you have available. The decision to buy is also tied to the question of financing. Most people who buy a home need external financing in the form of a bank loan. If you want to select a suitable credit offer, you need to consider other credit costs in addition to interest. Other important factors are your own creditworthiness (also known as credit rating) and collateral you can provide to secure the loan.

A key decision concerns the type of interest. The loan offers made by banks reflect their interest rate expectations for the future. These expected interest rates may or may not materialize. Interest rates may rise or fall, and monthly payments may therefore be higher or lower than planned. With variable interest rates, borrowers bear the risk of higher interest rates; if interest rates fall, on the other hand, borrowers benefit. In the case of fixed interest rate agreements, the bank bears the risk of higher interest rates. However, if the general interest level falls, the bank will benefit through a higher margin. Many loan offers provide for a limited fixed interest period of 10, 15 or 20 years. This means you should carefully consider possible risks for your household’s month-to-month budget planning. Are there expenses you could cut if your interest costs rise? Are there any reserves you could tap into if the interest burden increases unexpectedly? You may want to obtain independent financial advice to help you compare loan offers.

Due to the usually large debt associated with buying a home, it is advisable to carefully scrutinize your spending plans and your consumption habits in advance. It is also important to rethink how you deal with risks, for example, the risk of losing your income. Careful reflection can reduce the risk of becoming over-indebted.