A dream apartment in an old building with Fortis
9 January 2024 Specializing in the identification and acquisition of older buildings in prime locations in Berlin and Potsdam, FORTIS Real Estate Investment AG is turning its mission into reality – the creation of individual dream homes. In a double interview – exclusively for BERLINboxx online – with Christoph Hinz, responsible for transaction and sales management at Fortis, and Florian Heuer, district manager for OVB Vermögensberatung in Berlin, it becomes clear what constitutes a trustworthy real estate purchase of the highest quality standards today. From individual support throughout the entire purchase process to financing recommendations and an outlook on interest rate trends from the seller’s perspective – a transparent insight into the current real estate market.
How does Fortis support its customers in the purchasing process?
Hinz: We see our task as enabling individual and customized life prospects. As partners, we proactively accompany our customers and business partners through every step of their respective “journey”. With over ten years of experience and thanks to our solution-oriented thinking, we can find a suitable solution for almost any challenge.
How do buyers find customized financing for their property?
Hinz: As a rule, buyers first ask their house bank, as there is already a basis of trust here. However, we recommend every buyer, especially in the current interest rate phase, to consult an independent financial advisor and have all the alternatives shown to them. True to the motto: “Options only hurt those who don’t have them.”
Different financing institutions can evaluate the same facts in a differentiated manner with regard to financing amount, equity ratio and household income. This means that there are no direct additional costs for the buyer, and the bundled request via the financing broker does not negatively affect the scoring value of the prospective buyer.
Financing via insurance is an attractive alternative. What needs to be considered?
Heuer: As lenders, insurance companies are particularly interested in long-term and predictable income. They use this to finance the pension promises they make to customers. This means that the interest rate can be fixed over the entire loan term of 20, 25 or more years, from which the buyer benefits through a high degree of security in the planning of the financing.
As the idea of security is paramount with an insurance policy, it is not possible to lend more than 90 percent of the property value or purchase price. This means that you must always have ten percent of the purchase price as well as the ancillary purchase costs available as equity when financing through an insurance company.
What is the general situation with the equity ratio?
Heuer: Financing institutions currently prefer lower loan-to-value ratios, i.e. the ratio of the loan amount to the property value or purchase price. This is because the lower the loan-to-value ratio, the lower the risk on the part of the financing institution – be it insurance companies, building societies or banks.
Lenders want to ensure that the financing project does not “burst” over time. In principle, therefore, the more equity available, the more likely the financing project is to be successful and the better the conditions for interest, installment, term and repayment.
The rule of thumb of 20-25 percent equity of the purchase price has proven its worth. This ratio enables the ancillary acquisition costs to be covered and also includes at least ten percent or more of the purchase price.
What advantages do existing properties offer?
Hinz: In our properties, most of which date back to the Wilhelminian era, the resident structure, the neighborhood and the surroundings as well as the functionality have developed harmoniously over many years. The existing property is also advantageous from a sustainability perspective, because the “footprint” for the construction of the building has long since faded.
The customer can view the existing apartment and gain their own impression of the location, orientation, lighting and construction quality. The developer, on the other hand, sells the promise to complete the property as described in the brochure or plan.
The existing property also offers advantages for the financing bank, as only the existing building and not the planned construction, the developer and its creditworthiness and references need to be assessed and evaluated.
Which locations are particularly popular in Berlin?
Hinz: With a balanced price/performance ratio, there is a corresponding demand in almost every micro-location, even outside the S-Bahn ring. We are currently seeing stronger demand from international buyers who are used to buying an apartment rather than renting, as there is virtually no rental market in their home countries.
This group of buyers consists of young, internationally active professionals. Preference is given to very urban and lively districts such as Neukölln, Kreuzberg and Friedrichshain. These locations are better suited to the current living conditions of new Berliners.
Loans also have to be repaid at some point…
Heuer: There are various repayment options. Due to higher interest rates, banks are currently tending to operate with lower initial repayment rates again. Alternatively, there are financing models with interest rate hedging concepts. For example, bullet loans where the interest is paid separately and the repayment flows into a repayment replacement product, often a building society savings contract.
These models offer planning security over the entire financing period. There is also the option of bullet loans with repayment suspension, although these are more suitable for specialized financing projects.
Variable-rate loans allow for flexible interest rate structures. Planning security is lower, but the loan can be repaid quickly at any time.
Is there a possibility of early repayment?
Heuer: That depends on the financing concept. For example, an optional unscheduled repayment can be agreed. Financing institutions offer an almost standard 5 percent here. However, these special repayment options can be negotiated individually and therefore also amount to 10, 15 or 20 percent. With variable financing models, on the other hand, this is possible at any time, which is a decisive advantage.
How do you see interest rates developing over the next 12 months?
Hinz: The low interest rates of the past few years should not be seen as the norm. The current conditions are likely to remain the status quo for the time being. By pausing interest rates, the ECB has finally created a certain degree of planning security for buyers and sellers, which is also bringing more buyers back into the market. We expect a sideways movement, but this does not rule out the possibility of purchase prices rising again as a result of interest rate cuts.