Construction costs: Do lenders have to provide proof of construction costs without investments?

Hello everyone,

we have a loan agreement and a question about a clause in the contract.

It says under special agreements:

" The lender must be provided with proof of construction costs totaling 350,000€ excluding inventory.
If the value is lower, the lender has the right to withdraw from the contract or alternatively to reduce the loan."

However, our request is only for 345,000€ and our construction cost calculation according to DIN is 300,000€...
We also do not have a high loan-to-value ratio as we already own a plot of land of 1160m², which is valued at 280€/m² according to the standard land value.

We have already reviewed some offers/contracts, but this is new to us and we will not accept the contract as it is.

Does anyone know of similar clauses in loan agreements, is this normal?

Best regards, Fragri

Hello

I would discuss that with the bank. In your constellation, it should be okay in my opinion since you bring the property as collateral. The house + property serve as security.

One question about the construction costs. What do the 45k of the 300k include? Is it a buffer? Definitely get that clarified. As described, you are in the weaker position after the payout.

Hello HilfeHilfe,

yes, it is a buffer for safety so that we do not have to provide additional financing... we can also return up to €20,000 without additional costs if not drawn.
The €300,000 are the pure construction costs... the incidental costs of about €50,000 are added on top.
But about 70% will be paid from equity.

Regards Fragi

We write this in a similar form in all our (commercial) real estate loan agreements. Withdrawal is not possible at all, but loan reduction is acceptable; however, no non-acceptance compensation should then be incurred.

Hello nordanney,

I see it exactly the same way!
I will try to have the bank cancel the withdrawal.
I would also like to know how the proof is to be provided. (Invoices, expert ??)

Hello

the 50 incidental costs. What are they all?

Property transfer tax/ broker fees are not financeable. Everything else like garage / green areas I count as construction costs. It also adds value to the house.

I would provide all that later