Combined loan

Combined loans refer to a type of real estate financing that consists of at least two different loan components-typically a traditional amortizing loan from a primary bank and a KfW subsidy loan or an immediate building society loan. The goal is to achieve more favorable overall terms, subsidy benefits, and an optimized financing structure by combining different sources of financing. Today, the combination loan is the standard form of real estate financing for owner-occupied residential properties and investment properties.

Typical Combination Options

Annuity Loan + KfW Subsidized Loan: The primary bank finances the majority of the purchase price; a KfW loan (e.g., KfW 124 or KfW 261) supplements this with favorable terms and repayment-free initial years. The KfW portion can often be obtained at better interest rates than a standard bank loan. Annuity loan + building society loan: An immediate building society loan is combined with an ongoing building society contract, which replaces the loan upon allocation. Fixed-rate loan + repayment vehicle: A bullet loan that is not repaid but is replaced at maturity by a savings vehicle (life insurance, building savings contract)-less common today than in the past.

A fourth option is gaining importance in the context of the energy transition: the combination of a traditional annuity loan and a subsidy loan from the federal states or regional development banks (in Bavaria: LfA Förderbank Bayern). Anyone purchasing or renovating a building with high energy efficiency standards in the Nuremberg metropolitan region can take advantage of Bavarian state subsidy programs in addition to KfW loans, thereby further reducing total financing costs.

Advantages and Risks of the Combined Loan

Advantages: Access to subsidy benefits (KfW terms), flexible structuring (different fixed-rate periods for different risk segments), interest rate hedging for different terms, optimized monthly payments through the use of grace periods for individual components. Risks: Greater complexity in managing and monitoring multiple loans, potential costs associated with early repayment of a component (prepayment penalty), and differing fixed-rate periods require coordinated follow-up financing planning.

Special attention must be paid to the differing fixed-rate periods: If the bank loan portion expires after 15 years but the KfW portion only after 20 years, follow-up financing must be planned separately for each component. Those who neglect this coordination may end up paying higher interest rates because the extension is not timed optimally.

Tax Aspects of Investment Properties

For rented properties, the interest on both loan components is deductible as business expenses. The interest rates on the individual components can be tax-relevant: Lower KfW interest rates reduce the tax benefit; a higher interest rate on the main loan increases it. When planning a combined loan for an investment property, tax optimization should therefore also be taken into account-ideally in collaboration with a tax advisor and a financial advisor.

Important: If the financing components are used for different properties or partly for owner-occupied and partly for rental units (e.g., in a two-family home), the interest costs must be clearly allocated to the respective use. An unclear allocation can lead to tax issues.

Practical Tip for Property Owners in Nuremberg and Franconia

In Nuremberg and Franconia, the combined loan-comprising a portion from the primary bank and a KfW loan-is standard for many real estate financing arrangements. We recommend comparing several comprehensive financing offers before deciding on a bank-what matters is not just the interest rate of the main loan, but the total cost of all components over the fixed-rate period. It is particularly advisable to include current KfW programs in your financing plan early on for energy-efficient renovations in the region (facade, heating, windows), as the application must be submitted before work begins. At my-home.de, we connect you with independent financial advisors in the region who can put together various components tailored to your individual situation.

Frequently Asked Questions

Do I have to take out the combined loan with a single bank?

No. The KfW portion is always applied for through your primary bank, but it can be with a different bank than the main loan. In principle, it is possible to take out different components with different institutions if this is more economically advantageous.

Can I prepay a component of the combined loan at any time?

That depends on the terms of the respective loan agreement. For most fixed-rate amortizing loans, an early repayment penalty applies in the event of early repayment. KfW loans can be repaid without penalty under certain conditions. Please review the terms of each component carefully.

Is a combined loan also worthwhile for small financing amounts?

For very small loan amounts (under €80,000), the administrative costs for multiple components often outweigh the interest savings. For financing amounts of around €150,000-200,000 or more, a combination loan with a KfW component is generally financially sensible.

How do I coordinate the different fixed-rate periods?

A repayment schedule should be created as soon as the contract is signed, showing when each component expires and what remaining debt will still exist at that point. Ideally, all components end within the same timeframe or are intentionally staggered to allow for phased renegotiation. An independent financial advisor can help structure this planning.

What role does the equity ratio play in a combination loan?

The equity ratio determines which financing components are even available. For KfW promotional loans, there is generally no separate equity requirement specified; however, the primary bank, as the overall financier, typically requires at least 10-20% equity relative to the total financing need. For energy-efficient renovations without a purchase price component, the equity ratio may be lower, as the mortgage lending value of the existing building serves as collateral. In the Nuremberg metropolitan region, where purchase prices remain at a comparatively high level even after the 2022-2024 adjustment, careful advance planning of the equity base is particularly important: For a purchase price of 400,000 euros plus ancillary costs (approx. 50,000 euros), at least 80,000-90,000 euros in equity is recommended to secure attractive overall terms and make optimal use of all subsidy programs.

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