Climate protection is rewarded

In the past, it has already been possible to attain a loan with especially attractive conditions through the KfW Bank. Thanks to the climate protection package of the German goverment, from 2020 onwards, the KfW Bank will be even more interesting for customers with regard to new building projects and renovation projects. The climate protection programme aims at rewarding those who build a house or renovate eco-friendly. As from 24.01.2020, those eco-friendly orientated clients can choose from the KfW programme 151 renovation loans and 153 efficient construction loans. And in doing so, they can ensure up to 120.000 Euro per apartment or house, based on current conditions of 0,95 percent.

Fixed interest rates can be set up to ten years. The repayment will be adapted appropriately, so that the maximum term of the loan is thirty years. The KfW´s financing components are very popular primarily among constructors, who want to bring in little equitty capital regarding financing.

Traditional financial models are designed in this way, so that interest rate is independent from loan-to-value ratio of the real estate. That is to say, the more you bring equity capital into financing and thereby reduce the default risk for the bank, the better the offered conditions will be. Does a customer provide lots of capital resources to his project, the bank may grant such a benefiting interest rate, which finally exceeds the conditions provided by the KfW. 

Does the client choose total or partial financing by the KfW Bank, he or she doesn´t have to be afraid of any bureaucratic burden. Receiving a promoted loan is as simple as that, because KfW loans are applied directly at the bank and are carried out their. Since most clients carry out only a small part of their financing project through the KfW Bank and therefore need an other bank loan to cover the remaining capital requirements, the selected bank will handle the whole KfW proceeding. Should the borrower get into payment difficulties, the relevant bank will bear the liabilty  towards the KfW Bank. In return, the bank will receive a compensation by the KfW, and the total outstanding credit (KfW credit plus bank loan) will be secured by land register.

Let us take an example: After deduction of capital resources the client needs furthermore 300.000,00 Euro for buying a new single-family house. Therefore he receives a credit amount of 120.000,00 Euro by the KfW Bank. The remaining 180.000,00 Euro will be financed by a bank loan of the responsible institute. In favour of this banking institution, a land charge of 300.000,00 Euro will be recorded in the land register, at the relevant department. 

In that case, the bank takes care of the whole paperwork (certificate of the land charge/ agreements/application to the KfW Bank). There remains an important task for clients. So that the bank is able to apply for a KfW credit, the client has to consult a energy advisor recognized by the KfW, before doing renovation or building a new construction. Towards the KfW, the responsible consultant has to confirm compliance with the constructional conditions.

Speaking of the KfW interest rate, there is another benefit: Attractive repayment grants, who are granted for programme No. 151 and No. 153. Since 24. January 2020, the repayment bonus for programme No. 151 is 30.000,00 up to a maximum of 48.000 Euro. With regard to programme No. 153, the promotion is at least 18.000,00 Euro up to the maximum amount of 30.000.00 Euro. This is anything but a small sum of money. The amount of subsidy depends on the following: to which extend is the renovation or the new construction more energy-efficient than a standard property. Especially with renovation projects, the promotion with 48.000,00 Euro could turn out to be very abundant.

This, coupled with a very beneficial interest rate, could lead at best, that the client is provided with a minus interest rate of 6,8%, in real terms.


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Information about the author:

Alexandra Schneider is a certified bank business administrator and she writes about up-to-date topics, for FinanzierungsExpert.