The most important thing in brief:
- During the savings phase, the return is usually negative due to the costs. Tariffs with good savings interest rates are currently no longer offered for new contracts.
- You only have the prospect of a small return if you receive an employee savings allowance or housing bonus.
- You can only judge whether a building savings contract would have been worthwhile because of the low interest rates on loans when you look back, as you don't know whether the interest rates on loans will rise or fall in the future.
The conclusion of the building savings contract
A building savings contract is divided into two phases:
- The savings phase
- The loan phase
When you conclude a building savings contract, the building savings amount is first determined. The amount of this sum determines the total amount available from saved capital and a building society loan. When you sign the contract, you specify all the conditions, especially the amount for a later building society loan. You also have to pay an acquisition fee. This is 1 to 1.6 percent of the building savings amount, depending on the provider.
The details of your tariff can be found in the General Conditions for Building Savings Contracts (ABB), which you will receive when you sign the contract. Once you have clarified all the formalities with the building society, the savings phase begins.
The savings phase of the building savings contract
The motto for classic building savings is simple: First save, then build. So you invest money regularly and can then get a loan.
For example, to get a building savings sum of 10,000 euros, you pay 50 euros per month in this phase. After 8.5 years, the contract is ready for allocation, which means you have saved enough to take advantage of the building society loan. At this point, your balance is 5,100 euros plus interest on the balance. Depending on the tariff variant, an earlier allocation is also possible with a lower minimum balance.
Important: The building society will inform you how much money needs to be in your building society account and how long you have to pay in so that you can have the loan paid out. Before you have reached this so-called readiness for allocation, the building society cannot guarantee you the timing for the payment of the building savings sum – i.e. the loan and the savings. The information on the expected readiness for allocation is an estimate until then, so the payment date may still be postponed.
If more and more building savers apply for a building savings loan due to rising interest rates, you have to expect a much later allocation than the non-binding prospect that is currently offered to you. This has to do with the calculation of the valuation number, which the building societies use to manage their business.
At the moment, it is no longer possible to earn any significant credit interest during this savings phase, as most building societies only credit credit interest of, for example, 0.1 percent per year in their tariffs.
Conclusion in our example case after the savings phase:
Up to now, the building savings contract has not been a good investment for you. Because you only earned 21.94 euros in interest at 0.1 percent per year in 8.5 years. However, initial closing costs of 100 euros were due upon completion. This is a clear negative deal.
The example did not include a housing bonus or employee savings allowance. This could increase the profitability of the contract, but is subject to conditions. Without the bonuses, the bottom line would be more if you put the money under your pillow. Therefore, the savings phase of a building savings contract is currently not worth it from the point of view of “profitable savings”.
The loan phase of the building savings contract
Despite the loss in the first phase, you are now entering the payout phase of your contract. You can use your building society loan, which is the difference between the building savings sum and the balance. The interest rate for this loan is as determined when the contract was concluded, that is, if the tariff provides for an interest rate of 2.5 percent, then you will receive the loan at this interest rate.
For example, if you had to pay 4.5 percent for a building loan from the bank, you would have better conditions with the building society loan. However, you have previously paid for these conditions at a high price by waiving interest. If you add the interest waiver as a cost to the building society loan interest, the loan interest would effectively be well over 5 percent, depending on the case. Now the loan and repayment phase of the building savings contract begins.
Important: You usually have to repay building society loans much faster than other loans. As a result, the monthly burden is usually higher. You may also repay a building society loan in whole or in part at any time. This means: You will not incur any costs if you want to repay the loan early.
Conclusion after the loan phase:
Today, no one can honestly say whether the building society loan is actually cheaper. It depends on how high the interest rates on conventional loans are at the time you access the building society loan.
The building savings contract has an advantage, especially for loan amounts under 50,000 euros, which are often sufficient for conversions or renovations. Because if you take out a conventional building loan – also known as an annuity loan – without a building savings contract, you often only get the low interest rates for a building loan for a loan amount of 50,000 euros or more.
For smaller loans, banks offer a more expensive consumer loan. The interest rate is usually 2 to 4 percentage points per year higher than that for building financing. With a building society loan, the loan amount doesn't matter. However, you must note that a building society loan is linked to residential use. This means: You may only use the money from the loan for the purpose of renovation, renovation or housing construction.
