Retirement Without Debt. Whoever buys or builds is often 35 to around 40 years old. With properly thought out financing, retirement without loan payments is entirely possible.
Many people want to move into their own four walls at some point so that they no longer have to pay rent in old age. However, this plan only works if the loan for the house is paid off by the time you retire. Since many nowadays only start their home project in their mid-30s to early 40s, for professional or private reasons, things can get tighter depending on the property and financing volume.
Seven tips for financing:
- Equity Investment: With stable financing, the equity ratio for an owner-occupied home should be 20 to 30 per cent of the purchase price and also cover the ancillary costs – such as a notary, real estate transfer tax, and possibly broker.
- The Correct Repayment Rate: It’s the real key to the debt-free home. Because the higher the rate, the faster the loan is paid off, if it fits into the budget, it should be more than two per cent. From the age of 50 at the latest, the client should then do another all-round check. How much is the remaining debt? When is retirement planned? Do I have to and can I, for example, turn the repayment amount again to get rid of all debts by then?
- The Monthly Charge: A high repayment is all well and good – but the homeowner must also be able to afford it. As a rule of thumb, including all additional costs for the house, the monthly charge should not be more than around 30 per cent of the regular net.
- Involve The State: There are often good opportunities to use financial injections from the state when building or buying a house. Sponsors, for example, energy-saving new buildings or renovation measures, burglar protection or age-appropriate conversions in the form of grants or low-interest loans.
- Fixed Interest Rate: If the financing level is still low, as is currently the case, the mortgage lenders should fix the conditions for as long as possible to obtain more planning security and reliability. Fifteen years and more are useful. Besides, follow-up financing can also be prepared with a home loan and savings contract – with the low-interest rate secured for later.
- Use Special Repayments: Good loan agreements allow outstanding annual repayments of up to five per cent of the loan amount—those who can take advantage of these options put in an additional debt relief turbo. For example, inheritances or bonuses from employers are suitable for this.
Adapting property to live: This is also a possible strategy: With a view to retirement, the large house, in which, for example, the children also found space, is sold and replaced by a smaller and barrier-free apartment. This fits better with the living situation. Besides, you save pending – and possibly costly – maintenance work on your previous home. NOTE: This is not a zero-sum game. Even with the smaller apartment, there are ongoing ancillary costs such as garbage disposal, property tax or property management, which must be included in the monthly budget.