May 09, 2020
When it comes to real estate, many people are currently thinking of the significantly higher prices and of investors who prefer to invest their capital in concrete gold. It is often neglected that the trend of private property purchases is declining. This has less to do with construction interest rates, as these are still at a low level. Rather, it is, on the one hand, the further increase in property prices and on the other hand the stricter conditions that customers have to meet with regard to the equity ratio vis-à-vis the bank. Not least, for this reason, the federal government launched what is known as construction child benefit last year.
Child benefit is intended to strengthen families' equity position
With the entry into force of the EU Housing Loan Directive, banks have for some years now been required to place even more value on the customer's personal creditworthiness and not only to decide on a real estate loan based on whether sufficient collateral is provided in the form of a land charge. Since then, lenders' capital requirements have actually become stricter.
However, since young families with children, in particular, have often not yet had the opportunity to save a certain amount of equity, the prospects for a loan have deteriorated. The low building interest rates actually suggest that even young families with average incomes can buy real estate financing and thus their own house or condominium in Wiesbaden or elsewhere. On the other hand, of course, the further rise in real estate prices means that condominiums and houses are becoming increasingly expensive.
Ultimately, the construction child allowance created can help, on the one hand, to provide more equity and thus increase the chances of a real estate loan. On the other hand, the need for external financing decreases with more equity, so that a little more families with children can afford their own four walls. In the following sections, you will find out the conditions under which you can apply for child benefit, how high the funding is, and what else is interesting about the topic.
Where do I apply for child benefit?
In principle, you can apply to the KfW bank for child benefit as a subsidy from the state. There, the child benefit is one of the numerous support programs that are aimed particularly at loan seekers, home builders, property buyers, students, and start-ups. Before applying, however, you should check whether you meet all the requirements associated with the approval of the state funding. At a glance, these are the following conditions that you must meet:
At least one minor child in the household
The income limit is not exceeded
Private residential property exists or is to be acquired or built
Application for child benefit was made
In principle, if you can meet these conditions, there is no reason why the child benefit should not be approved. Then you are a good step closer to your goal, for example, to buy a house in Wiesbaden.
Do banks recognize child benefit as equity?
The answer is yes! This is exactly one of the main purposes of the child benefit, namely to strengthen the loan holder's equity position vis-à-vis the bank. The fact that the credit institutions almost fully recognize the state funding as equity capital has to do with the fact that the amount of the child benefit is fixed and, above all, the payment is guaranteed over a period of ten years. You and banks can, therefore, calculate that the approved child benefit will be paid out for a total of ten years. So you have absolutely safe equity, for example, if you buy a house and Wiesbaden is your preferred location.
How much is the child benefit?
At this point, you probably want to finally know how high the child benefit actually is. Information about this can be provided by professional brokers, such as a real estate agent from Wiesbaden, Paul & Partner. The arrangement is very simple: for every minor child for whom the legal guardians are still entitled to child benefit, construction child benefit is paid in the amount of 1,200 euros per year. To date, there is no limit to the number of children, so for example, for four underage children in the household, you would actually receive 4,800 euros per year. As a result, you would get a total of 48,000 euros within the next ten years. This sum can be used as equity in construction finance. The child benefit is therefore particularly worthwhile for families with several children.
What are the income limits for child benefit?
An important limitation with regard to child benefit is the applicable income limit. You must not exceed a certain gross income, otherwise, the application for child benefit will not be approved. However, these limits on gross income are set relatively high, so that families with an average income can also benefit from state support. The respective income limit is graded according to the number of children and looks like this:
1 child: € 90,000
2 children: € 105,000
3 children: € 120,000
4 children: € 135,000
As you can easily see from this graduation, the income limit as a base amount is 75,000 euros. You can then add another 15,000 euros per child so that, for example, you cannot exceed a gross income of 105,000 euros for two children. From this value, you can already see that families with an average or even slightly above-average income can still benefit from the child benefit. The average gross income per person in Germany is currently around 38,000 euros per year.
Do I have to hurry up to apply for the child benefit?
A very interesting question regarding child benefit is how long the state will continue to pay it. The fact is that the Federal Government provided a pot of around EUR 10 billion retrospectively as of January 2018. So far, however, a relatively large number of families with children have applied for child benefit and have therefore applied for or already received funds from this pot. It is not yet certain whether there is a kind of the second phase if the financial resources for the child benefit are exhausted. Therefore, it is advisable not to wait too long to apply if you want to buy or build a property in the near future.
What is the construction child benefit plus?
In the recent past, the term building child benefit plus has appeared more and more in the media. This is an additional application for funding, which is only available for families from Bavaria. In the southern federal state, on the one hand, the normal child benefit is paid in the amount of 1,200 euros per child. In addition, there is an additional payment of 300 euros per child per year. Therefore, the child benefit plus in Bavaria amounts to 1,500 euros per child per year. So if you live in southern Germany and have two children, for example, you will receive a total of 6,000 euros more in government funding over a period of ten years.
Do not neglect other funding opportunities
On the one hand, the construction child benefit provides very good support, so that more families with children have the chance to get a home loan. On the other hand, you should not forget possible further funding, which Paul and Partner, as an experienced maker from Wiesbaden, recommends. This particularly relates to the Riester pension. There you can, for example, also use the so-called residential giant to pour additional money into the repayment of the real estate loan. Further possible subsidies in the savings phase, for example, when saving a home savings contract, are the housing construction premium and the employee savings allowance in connection with an asset-based benefits contract.