Exploring the possibilities of a housing savings contract:
Sometimes, people sign up for a bauspar contract, either as a parent's move or a future ambition: taking out a mortgage loan. Not every individual is sure about their desire to own property down the line. And even if they do, plans change. This isn't a big issue in the end. The accumulated balance from this plan is relatively flexible, while the bauspar mortgage is within certain limits. With a bauspar contract:
1. Utilization for Property Acquisition or Renovation
As per the general terms and conditions for bauspar contracts (ABB) and the Bausparkassen Act, the purpose of a bauspar contract is for residential uses. This sets it apart from traditional savings contracts, indicates Christian König from the Association of Private Building Societies.
The balance and bauspar mortgage can be utilized for various purposes, such as purchasing or building residential property, maintaining or enhancing a property, purchasing building land, developing residential areas, redemption of a construction loan, or acquiring shares in real estate funds.
When used as such, savers don't need to worry about losing their housing allowance granted by the state. In all other uses, one would have to repay it, mentions Niels Nauhauser from the Consumer Center Baden-Württemberg. However, this only applies to a maximum of 70 euros in allowance per year.
2. Keep the Balance as It Is
If a contract qualifies for allocation (sufficient savings to claim the bauspar mortgage), it does not necessarily have to be used immediately. It is also possible to leave the contract dormant for some time. This is particularly advisable if you don't currently wish to buy a property, but its purchase is imminent and you'll need the bauspar sum at that time, advises a savings bank's information page. After allocation, savers have at least 10.5 years to still use the contract for residential purposes, according to Christian König.
However, if it's clear that no property acquisition or renovation will be required, and there's no other residential use for the bauspar contract, the balance can essentially be left in the contract. Whether this is beneficial, however, depends on the situation, according to Nauhauser. Generally, interest rates on savings are worse there than, for example, on day-to-day or fixed-term deposits. However, according to the Consumer Center NRW, some older bauspar contracts do offer good interest rates – sometimes there's also the option of bonus interest.
3. Continue Savings
After allocation, the bauspar contract can usually be continued. Although the maximum savings amount is fixed at contract signing, it can be increased with the building society's agreement, indicates Christian König. "This can be sensible if the originally agreed bauspar sum is no longer sufficient for the now-planned project," says the savings bank. In this case, savers should definitely arrange a consultation meeting with their bank or savings bank.
4. Transfer to Third Parties
If you have no use for the bauspar contract, but your children, grandchildren, nephews, or other relatives could benefit from the money for their construction project, the contract can be transferred with the building society's agreement. Beneficiaries profit from the previous savings efforts and may be able to reach the allocation more quickly.
By the way: In the case of a building society saver's death, their heirs or persons named in the contract automatically assume the building society saver's rights and can continue to save or apply for the loan.
5. Only withdraw the balance
If a building society contract is eligible for allocation, building society savers can withdraw their balance and apply for the mortgage loan. However, the loan application is optional, says König. Those who choose not to apply will simply receive the interest-bearing balance minus the conclusion and administration costs, as well as any housing construction premiums received. "In this case, the contract ends after you have received your balance," says König.
6. Termination
"Alternatively, the contract can be terminated at any time," says König, whether the contract is eligible for allocation or not. "In this case, the building society saver loses the claim to the loan and the housing construction premium." Exceptions to this apply in certain hardship cases of customers.
Building Savings for a Rainy Day
Even if you're not planning to use your bauspar balance for property acquisition or renovation immediately, it can act as an emergency fund. The flexibility of the balance makes it a suitable option for saving up for unexpected expenses.
Transitioning to Other Investment Opportunities
If your financial situation changes, or if you find better investment opportunities with higher returns, you might consider transitioning your bauspar balance to other investment vehicles. However, it's crucial to weigh the potential returns against the potential risks and consider seeking expert financial advice before making such a decision.
