Buying or renting: you should pay attention to this

01 "Nobody can afford their own property these days anyway."

Right and wrong. Buying an apartment, especially now, in the middle of the crisis? That may contradict your own gut feeling, but it can work – provided you still have a secure income. Because interest rates have long been and are still sensationally low. But: To get a loan at all, you have to be able to finance a certain portion of the purchase price from your own resources (see point 3). And of course, the more the property costs, the greater this amount.

In other words: Especially in metropolises like Berlin, Cologne or Stuttgart, where purchase prices have exploded in recent years, it is often quite difficult for people who earn little, i.e. who can save little, and who also do not inherit anything, to get a loan get. The number of households buying their own property for the first time has fallen from 800,000 to 600,000.

02 "At the moment, buying only makes sense in the country."

Right and wrong. According to reports from the Bundesbank, many apartments and houses in the city are overvalued by 15 to 30 percent – in large cities such as Berlin, Frankfurt am Main, Cologne or Munich by up to 35 percent. That carries risks. Because, for example, the central bank will eventually raise interest rates again, so that investors would rather put their money back in government bonds than in city apartments, real estate prices can fall quickly. So far, they seem to have remained stable despite the corona crisis.

But buying real estate in the country is not automatically a safe number either. Many properties are already losing value due to the rural exodus. A decision aid can be the so-called purchase / rental ratio, i.e. the ratio of the purchase price to the total rent excluding charges for a year. "If the purchase price is more than 30 times the annual basic rent, we would advise against buying it – even in metropolises", says Jörg Sahr, real estate expert at the magazine "Finanztest". In other regions, even 20 times as much is already too much. Especially with properties in villages, the location should be attractive and well connected. That makes reselling easier.

Another new location factor is recognized by Dr. Peter Hettenbach, who analyzes the real estate market on a daily basis with his iib institute: "During the Corona crisis, many people found that home office works well, that they can save themselves the tedious journey to the cities. This means that more rural communities will also be able to do so in future become more attractive for real estate purchases if they have a strong internet connection. "

03 "Anyone who can raise 20 percent of the purchase price with their own resources can buy without worry."

Right – at least as a rule of thumb. More equity would of course be better, because the less a bank has to take on the risk of lending, the lower the interest rates. With 20 percent equity, buyers would have a solid base, says Barbara Rück from the NRW consumer advice center.

"It is very important that buyers can at least finance all ancillary purchase costs – for example notary and broker fees as well as real estate transfer tax – from their savings." Of course, it is important to have a secure income so that you can pay the loan installments reliably. Rück advises that you shouldn't rush into anything, especially now during the crisis. The loan installments plus the running ancillary costs for living should not exceed 40 percent of the net income.

04 "A credit purchase should only be undertaken if you are under 50."

Not correct. "People over 50 years of age in particular often have high savings and a high income and can therefore pay off the debts on their property in a comparatively few years," says real estate expert Sahr. Ideally, this should be the case at the latest when you retire. Otherwise, buyers should calculate well in advance how much pension they will have available – and whether that is enough to then continue to repay the loan.

05 "The loan repayment rate should be as high as possible."

Right and wrong. The faster you can repay money borrowed from a bank, i.e. the shorter the term of the loan, the cheaper the interest rate is usually. On the other hand, you should always include a buffer so that you can pay the rate even if you suddenly have to buy a new car or refrigerator. Tip: In the contract with the bank, first specify a moderate repayment installment and also so-called special repayment options.

So you can pay back money at certain times, about once a year, if you have it in your account. The current economic crisis in particular has shown how important it is for buyers to be able to change their repayment installments during the loan period, says consumer advocate Barbara Rück. Then you can reduce your rate if you are on short-time work or even lose your job.

06 "Financially speaking, it is more advisable to rent than to buy a property and then live in it yourself."

Right and wrong. Whether renting or buying makes more sense depends on many factors. How much is the purchase price of an apartment compared to rent? How long do you want to live there? Do you really want to tie up a large part of your assets in a property? Real estate expert Hettenbach observes that younger people in particular no longer want to commit themselves to this.

As an owner you also have significantly higher ancillary costs than as a tenant, for example for house electricity, administration, waste disposal. Or if the elevator suddenly has to be replaced in an apartment building. "Do not equate the rent with the loan installment!" Warns Barbara Rück. "If the rent is at the absolute limit and is only enough for the loan installment, buying is not advisable."

Cooperative living can be a middle way: tenants become co-owners of a cooperative, have more say and often live more cheaply than in normal rental apartments.

07 "Better to rent and rent your own property – this is the best way to save taxes."

Not correct. "The tax advantages of renting are often overestimated," says consumer advocate Rück. A tax advisor should check this on a case-by-case basis. If you rent out the property, you can also be unlucky when choosing a tenant. Conversely, one thing is certain: if you live in your own apartment instead of renting it out, you save yourself a lot of work.

08 "Heritable building right is a good alternative to buying land."

Wrong – at least for most of them. With heritable building rights, you lease a piece of land and build a property on it. During the lease period (usually 50 to 99 years), you pay a certain sum of money every month as a lease – the so-called ground rent. After that, the right of use reverts to the owner. There are then three options: 1) You buy the property. 2) The property owner buys the property. 3) The lease is extended.

Long-term leases are interesting, for example, for people who cannot finance the purchase of a property because their bank does not give them any money for it. For everyone else, a purchase is currently the cheaper option, says Sahr: "At least currently, mortgage rates are usually lower than ground rent." The reason: Mortgage rates can be fixed for many years, ground rent is usually linked to the inflation rate or gross income. In some places, however, there are churches or municipalities that give families leasehold properties at special rates, says Sahr: "That can then be worthwhile."

09 "You can get a real bargain at a foreclosure auction."

Not correct. Even if a property is always described by appraisers before the auction, it could happen that you buy a "pig in a poke", warns Barbara Rück. "Sometimes the experts can only examine the property from the outside." In this way, it is not possible to tell whether there is a mold problem in the house, for example. If you want to bid, you should always set an upper price limit and then stick to it. Again and again, bidders in foreclosures rock themselves so high that the supposed bargains tend to be sold at exorbitant prices in the end.

What is this house worth?

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