TL;DR
- Funding for the purchase or construction of a property
- Up to €100,000 loan amount
- Applied for as part of the property financing
- Interest rates are often more favorable, but high repayments are necessary
Table of content
What is the KfW Home Ownership Program 124?
The so-called KfW 124 program is the funding program of the Kreditanstalt für Wiederaufbau (KfW) for the purchase of owner-occupied real estate. As part of the program, you can get a low-interest loan of up to €100,000 from the KfW. The loan is added as an additional component to the real estate financing and is therefore only ever available in combination with a “normal” real estate loan.
A KfW 124 component is not always the best option for your financing. This article will tell you when it is or is not worthwhile and what the advantages and disadvantages of the KfW 124 funding program for buying real estate are.
How does a KfW 124 loan work?
The KfW Home Ownership Program 124 is characterized by its fixed interest rate for 5 or 10 years, which allows you financial planning security. Note that the KfW 124 loan is not a stand-alone loan and only works in combination with a main financing.
What is funded by the KfW 124 program?
The federal government uses the Kreditanstalt für Wiederaufbau (KfW) to promote the acquisition of owner-occupied real estate. It does not matter whether it is the purchase of an existing property or a new building. However, it is important that it must be owner-occupied residential property. If you want to purchase a property as a capital investment, the KfW 124 program is not for you. Special cases, such as a vacation home or the financing of extensions to your own property, are also not possible.
So that you know exactly which measures can be funded with the KfW 124 program, here is a brief overview:
Is funded
- Cost of the property for new construction (must have been purchased no more than 6 months before the application is received by KfW)
- Construction costs such as materials and labor for new construction
- Incidental construction costs such as architects, notaries, building consultants, real estate fees and land transfer tax
- Costs for outdoor facilities for new construction
- The purchase price
- Costs for modernization, repair and conversion
- Incidental purchase costs such as notary or real estate fees and land transfer tax
Is not supported
- Construction / purchase of holiday homes and apartments
- Purchase of commercial space
- Debt consolidation of existing loans
- Follow-up or follow-up financing for projects that have been started or completed
- Measures for owner-occupied residential property, e.g. home extensions
How high are the interest rates for the KfW 124 program?
The conditions for the KfW 124 program depend on the type of loan and the term. On the one hand, there is an annuity loan, where you pay the same installment every month, which consists of a portion of interest and another portion of principal repayment. The special thing about this is that you can choose a grace period of between one and five years, depending on the term of the loan. During this time, you only pay interest. This is particularly helpful if you still have some modernization work to do on your new home.
Currently (as of January 2024), the interest rates for the annuity loan are around 3.52-3.61% per year.
On the other hand, you can also choose an bullet loan. Here you only pay the interest (currently 3.52–3.61% per year - as of January 2024) and repay the loan at the end of the agreed term.
The table below shows an overview of the currently valid interest rates for the KfW 124 program.
Annuity loan
|
Term |
Fixed interest rate |
Grace period |
Annual borrowing rate (effective annual interest rate) |
| 4 bis 25 Jahre | 5 Jahre | 1 bis 3 Jahre | 3,41% (3,46%) |
| 4 bis 25 Jahre | 10 Jahre | 1 bis 3 Jahre | 3,42% (3,47%) |
| 26 bis 35 Jahre | 5 Jahre | 1 bis 5 Jahre | 3,40% (3,45%) |
| 26 bis 35 Jahre | 10 Jahre | 1 bis 5 Jahre | 3,42% (3,47%) |
Bullet loan
| 4 bis 10 Jahre | 10 Jahre | 1 bis 5 Jahre | 3,42% (3,47%) |
What are the advantages and disadvantages of the KfW 124 program?
Does a KfW 124 loan make sense as a building block in real estate financing? Of course, there is no general answer to this question - in each individual case, it always depends on the specific circumstances. Among other things, it also depends on the interest rate of the main financing bank - because: The KfW 124 loan cannot be issued as a stand-alone loan, but only in combination with a real estate financing provided by a bank or savings bank. It should be noted that not every bank works with KfW.
The interest rates of the KfW 124 loan are usually favorable, but they are independent of the loan-to-value ratio of the real estate financing. This means that the interest rate of the KfW funding is always the same, regardless of whether 50% equity or 0% equity is contributed.
Especially when a lot of equity is involved, the KfW interest rate is usually less attractive.
We have summarized the advantages and disadvantages of the KfW 124 program in a table.
|
Advantages |
Disadvantages |
|
Can be combined with other KfW programs |
Only interest rate lock-in period of 5 to 10 years |
|
Interest-only initial years |
Only 12 months of interest-only period, followed by a monthly interest rate of 0.15% of the remaining debt |
|
Constant monthly installments with fixed interest rates |
No unscheduled repayments possible during the term |
|
Can be taken out as a bullet loan |
Combining KfW 124 with other funding programs
The KfW 124 program can be optimally combined with other funding programs to both facilitate financing and obtain additional funding for special measures.
Combination options with other KfW programs
- KfW 261: Energy-Efficient Construction and Renovation: This program supports measures to improve energy efficiency in new and existing buildings. It can be used, for example, for insulation, replacing windows or installing modern heating systems. This not only saves you interest, but also reduces energy costs in the long term.
- KfW 270: Renewable Energies – Standard: If you want to use renewable energies such as photovoltaic systems, solar thermal energy or heat pumps in your construction project, the KfW 270 program offers attractive promotional loans. It is particularly suitable for those who want to rely on sustainable energy sources while reducing their environmental impact.
- KfW 159: Age-appropriate conversion: This program is aimed at builders or real estate buyers who want to convert their house to make it age-appropriate. It offers funding opportunities for measures such as installing stair lifts, barrier-free access or adapting bathrooms to improve mobility in old age.
How do I apply for the KfW 124 program?
To successfully apply for the KfW Home Ownership Program, follow these steps:
Step 1: Get to know the funding options
Find out from your bank about the financing of your home. Ask about the various funding options offered by KfW and find out which combinations can help you to receive the maximum funding. Make a note of all the important information you receive from your bank.
Step 2: Submit an application to KfW through your bank
Submit the application to KfW together with your advisor. Your bank will help you to put together all the necessary documents. Make sure that all the information is correct to avoid delays. Be sure to submit the application before you start your project.
Step 3: Awaiting the funding commitment from KfW
Wait for the KfW's approval before signing the purchase agreement for the property. Make sure you also have the financing commitment from your bank. Only make an appointment with the notary after receiving both commitments.
Wait for this commitment from the KfW before you sign the purchase agreement.
Step 4: Retrieve the funds
As soon as you have received the funding commitment, you can conclude the purchase contract. Retrieve the agreed amount. For new buildings, you can retrieve it in instalments. For existing properties, the loan amount is paid out in one amount.
Important: Your application must be submitted before the start of the project in order to secure the funding.
With these steps, you are well prepared to apply for the KfW Home Ownership Program and benefit from its advantages! If you need support, our financing experts will be happy to help you find the best funding for your property. Just contact us for a personal consultation.
