City Escape: Financing Home Ownership
For months there has been talk in Germany of a rural exodus. Especially young people should move to the metropolises because they see greater opportunities for their future here. This development brings with it a central problem: Housing is becoming increasingly scarce in cities, which is felt by tenants and property buyers. Their way out: The flight to the countryside.
Idyllic villages - the dream of many young couples. Especially those who grew up in the city, long for a change, far from the bustle of the city. The current trend of rural exodus intensifies this urge. Houses, apartments and construction sites are becoming rarer and more expensive. Many families can no longer afford city life. According to the market report Germany residential and commercial buildings in 2016, the square meter price for an average Munich condominium is almost 5,000 euros. For an apartment in one of the seven most important German cities (Berlin, Munich, Cologne, Hamburg, Stuttgart, Dusseldorf, Frankfurt / Main) prices rose last year by seven percent. One square meter costs here on average 2,970 euros. Since the average German apartment is around 90 square meters, it would cost around 267,000 euros. A price that many consumers can not pay.
Statistics on the subject
Price development of German homes (2003 = index 100)
Source: Verband deutscher Pfandbriefbanken (2003 to 2015, Germany)
More and more Townspeople move to the countryside
Even if there is always talk of a rural exodus, the reality is a bit different. According to a study by Empirica, more people have been moving to the surrounding area for five years than residents move into the city.
The problem of many city dwellers is that they only see the positive side of rural life. You visit an idyllic place at the weekend and are delighted by the green meadows and well-kept houses. Few of them suspect that they have to drive to work in the city on weekdays at a snail's pace. The alternative would be to take the S-Bahn, would not the housing prices around the stations are so high.
The move to the country needs to be well thought out
The aforementioned scenario is a good example of why interested parties move should think well into the country. The country life has not only a chocolate side, but also some disadvantages. The long way to work is one of the dark sides, which is not negligible. According to the Federal Employment Agency, there are around 17 million commuters in Germany. Half is on the way for over an hour. City refugees must consider whether it is profitable for them to spend this hour unproductively in a car.
Everybody has to analyze their situation individually. There is no recommendation for the general public. Country life has pros and cons.
Of course, there are people for whom commuting is not a question. Freelancers and other people working from home will feel comfortable in the countryside. You have the opportunity to enjoy your breaks in the garden. As a homeowner, you have the option to set up a home office in the house or garden. For them, life in the countryside is associated with more advantages than disadvantages.
The two different situations make it clear that every human being has to analyze for himself whether he benefits from the move to the countryside. He can do this analysis with a simple checklist that compares all the advantages and disadvantages. He should not make the decision based on the overwhelming benefits. Rather, sufferers have to decide if they can accept the disadvantages of moving to the countryside.
Determining one's own financing power correctly
In times of low interest rates, everyone can apparently afford the dream of owning their own home. What sounds simple in theory quickly turns into a nightmare in reality. In 2014, around 31,000 foreclosures were completed in Germany. In many cases there is a guiltless cause behind it:
Consumers can protect themselves against these risk factors with appropriate insurance.
In some cases consumers are blamed, such as from an article by Interhyp that wrote good home finance tips. In it, the author warns against badly-calculated home equity financing.
Practice has shown that many consumers cheat on the cash-case crash. In doing so, they lie to and hurt themselves. Whoever miscalculates his income and expenses sooner or later becomes in need of payment.
In this article we have shown by means of a concrete example how a family calculates the costs of a house construction.
Financing without equity is particularly risky. This option to finance the home is offered by some banks and is intended to help low earners to fulfill their dream of owning a home. Since the bank assumes a higher risk in a full financing, borrowers pay larger interest. The dream of a home is therefore associated with particularly high costs.
Many homes are not paid off in old age
In order to clarify the importance of a solid house financing, the mention of a statistics is sufficient: Almost one in four property owners (older than 69 years) has his apartment is not paid off. Many of them remain in debt until the end of their lives, according to a study by Deutsche Leibrenten AG and the Institute for Insurance Science in Cologne.
Unexpected events in life - as we have already mentioned in this article - are the main reason why a real estate loan is not allowed before entering the market Retirement age is eradicated. The retirement at retirement age is difficult. On the one hand, the pension is lower than the former wage, on the other hand, other costs are often added, for example for the care.
Even for heirs, an unreturned property is problematic. Borrowings remain after the death of a borrower and are transferred to his heirs. These are so-called estate liabilities. The debt is taken into account in inheritance tax and deducted from the estate value.
Heirs have the option to defer the inheritance if the debt exceeds their assets. The disclaimer must be made within six weeks.
Logical in the dream of a home and think about tomorrow
Who can afford the dream of home ownership and has calculated his financial framework, has taken the first step. With the monthly budget, consumers can calculate what amount they can finance and what kind of home they can afford.
When furnishing and designing the home, really only the needs of the residents should be met. Even if the average German citizen has a living area of 40 square meters, there are people who manage with less. The living space itself is not very decisive. What is important is what you make of it. In large cities, where housing is expensive and rare, architects show that small apartments and houses can look large if properly furnished. Instead of taking the living space into their own hands, consumers prefer to invest in an architect who will do the job for them.
By reducing living space, builders save money that they can invest in more important things:
- a barrier-free living space
- renewable energy
- meeting a better energy standard
These things increase the standard of living and comfort in the home - not only today, but also tomorrow and at the latest at retirement age.
When planning the home, also consider external financing options, such as grants and subsidies. They relieve their financial expenditures and give them more freedom.
Statistics show that the rural exodus does not take place to the extent that is reported. Currently, more people are moving to the countryside than moving to the city from there. The move to the countryside should be well considered, as it brings many advantages and disadvantages. What does not change in home equity financing is the need to plan well. It is also important to plan ahead with the purchase or construction and to think about the future.
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