June 1, 2023, 3:11 am | Read time: 4 minutes
High interest rates and construction costs are pushing the dream of owning a home further out of reach for many families. The federal government wants to help. Now there are new funding opportunities for home construction.
Families with low and middle incomes can receive low-interest loans and grants from KfW for climate-friendly home construction starting in June. Initially, a 1.25 percent interest rate will be offered, said Building Minister Klara Geywitz (SPD) in Berlin. This is significantly cheaper than the current market rates of around 3.5 percent for loans with a ten-year fixed interest rate.
How Families Benefit from Home Construction Funding
A family with two children could save around 40,000 euros when building a particularly climate-friendly house, Geywitz explained. “The new program is a reliable support for homeowners, making climate-friendly construction projects feasible and affordable.”
This is also a response to the recent decline in the construction of single-family homes. Due to sharply increased interest rates and high material costs, there has been significant uncertainty among citizens, Geywitz said. “This has, of course, thrown many families’ calculations off track. And this new funding addresses that.”
Which Families Are Eligible
The new funding is available to families with at least one minor child. They must have a taxable household income of no more than 60,000 euros. This limit increases by 10,000 euros for each additional child. According to Geywitz, three-quarters of all households in Germany are eligible.
Nevertheless, the income limit is the biggest point of criticism. “Anyone who wants to take advantage of this funding needs a low income and must simultaneously be wealthy,” said housing market researcher Matthias Günther from the Pestel Institute of the Funke Media Group. Michael Neumann from the credit broker Dr. Klein criticized that the required energy efficiency standards could only be afforded by a few despite the funding. Geywitz emphasized that they had oriented themselves to the average income of applicants for the Baukindergeld, which was below 60,000 euros.
Which Houses Are Eligible for Funding
The requirement is that the family intends to live in the house themselves—and does not already own other residential property. Vacation homes and second residences are not eligible for funding.
To help Germany achieve its climate protection goals, the loans are only available for new constructions with a low CO2 footprint. Specifically, they must meet at least the EH40 standard, meaning the building can only consume 40 percent of the energy a standard house requires. To reach a higher funding level, the stricter criteria for the Sustainable Building Quality Seal must be met.
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How Much the Funding Is
This depends on the climate-friendliness of the house and the number of children. Initially, a loan with up to a 35-year term and ten-year fixed interest rate will have a 1.25 percent interest rate. However, this can fluctuate.
In the lower funding tier, a family with one or two children can borrow up to 140,000 euros at a low interest rate. This amount increases to 190,000 euros for five children. Those who build even more climate-friendly can receive 190,000 euros with one or two children, and up to 240,000 euros with five children. It is criticized that this is not enough to build a house in most areas in Germany.
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How Much Money Is Available
According to Geywitz, at least 350 million euros are available this year to enable the low-interest loans. She could not yet specify an amount for subsequent years, as the federal budget for 2024 is still being worked on by the government.
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Funding Not Only for New Construction
Buyers of newly built climate-friendly residential property can also receive low-interest loans. The buildings must be purchased within one year of construction completion and meet the climate and efficiency standards. However, there is also criticism here: “With the current income limit, it is simply no longer possible in many cities to acquire a property that is eligible for funding,” explained the Central Association of the Construction Industry. “The purchase prices are simply too high for many potential builders.” Financing intermediaries are calling for support for the conversion and expansion of existing properties.
What to Consider When Applying
Anyone wanting to apply for a low-interest loan must work with an energy efficiency expert. This expert checks and confirms compliance with the requirements. The loan is then applied for before construction starts at a bank, savings bank, building society, or financial intermediary.
with material from dpa