Construction financing at 95%?

Good night everyone!

Some of you might notice it right now -> 02:05 am.
Yes, that’s how it is at the moment when you are dealing with probably the most important question of your "financial life."

During my now almost daily internet research, I came across this forum and before registering, I already looked at some threads on the topic of construction financing.

I would like to present my project and ask for your opinion and possibly support :)

A brief introduction about us:
We are 30 and 40 years old and have a small daughter together.
Currently, we rent (about 650 euros warm), but now we want to look for a property relatively soon. Specifically: 2nd quarter 2011.

Current situation:
We are both employed full-time and earn about 4,500 euros net together (I’m not counting child benefits now).
It might be worth mentioning that we both work for the same company. Although we are located in different branches, it is still the same company.

Project:
We would prefer to build new. The goal is about 130 - 140 m2 with a plot of “usually” 600 m2. Carport, garden, kitchen and possibly new furniture of course should not be missing.

Our equity amounts to about 15,000 euros so far… which is unfortunately far too little.
We don’t have anything concrete in hand yet, but we now assume a total amount of about 300,000 euros.
Accordingly, we are talking about 95% external financing.
In two initial talks with our house banks, we were already told that such financing is generally possible, but we still have some reservations.

The most important question for us is: Do we use the hopefully still favorable loan interest rates of 3.4 - 4.0% in Q2 2011, or do we save for another 2 - 3 years to build equity?
If the interest rate rises by X%, we might have “saved for nothing,” as a possibly higher interest rate would practically eat up the savings again.

You keep reading that many people (also here in the forum) commit to almost 100% financing. We are not quite sure yet what the right path is for us.

Although you’re supposed to put the cart before the horse, I would still like to take your advice.
We roughly calculated and said that we want to plan a monthly burden up to a maximum of 1,400 euros (1,000 euros interest + repayment plus 400 euros ancillary costs). Do you think a financing of this amount with this monthly framework is sensible or even possible?

To answer the question in advance: With 1,400 euros, we still trust ourselves to maintain the property even in the event of a possible loss of income.

Furthermore, we want to know what we are getting into. In other words, we feel “intuitively” better about a long-term fixed interest rate including KfW subsidies for 10 or 15 years than with the various building savings ideas from the house banks.
I find some of that totally opaque: Save money here, invest there later and secure low interest rates, then possibly reshuffle or split and so on and so forth.

I would be grateful for your opinions!

Best regards, Villariva

EDIT: Could the mod please change the thread title to "Baufinanzierungnanzierung zu 95%?" otherwise I get eyebleeding every time!

Hello and good day J

Financing is as individual as the people themselves, so every answer given here can only be a shot in the dark.

Project: We would prefer to build new. The goal is about 130 - 140 m2 on a plot of "usually" 600 m2. Carport, garden, kitchen and possibly new furniture, of course, should not be missing either. Our equity capital currently amounts to about 15,000 euros .. which is unfortunately far too low. We don't really have anything concrete in hand yet, but we now assume a total sum of about 300,000 euros. Accordingly, we are talking about external financing of 95%.

Experience values: A single-family house 130 – 140 sqm costs, depending on the requirements for the equipment and number of floors, between TEUR 145 and TEUR 175 on a base slab, a carport depending on the design between TEUR 6 and 8; taking the average, you can set TEUR 167 for both positions. To this addition, add incidental construction costs in the range of TEUR 30, then you have TEUR 103 left for the plot you favor. Depending on the desired location, it already looks bad for a new kitchen, let alone furnishing. Meaning, realistically, you should assume investment costs of about TEUR 350 for a construction project of this size.

After two initial discussions with our house banks, we have already been told that such financing is generally possible, but we still have some doubts.

First of all, you are not putting the cart before the horse! It is always better to know your financial possibilities exactly in advance.

What I do not quite understand is why you believe you can expect a well-founded and also tailored answer to your personal situation in a forum like this or similar. Building has been and will always be one of the biggest personal investments for the vast majority of builders and, in my firm conviction, should also be treated carefully as such. After all, you are not planning to buy a pound of cold cuts, where many readers here could probably tell you the right butcher in your region.

There are many seriously working and independent financing brokers nationwide; this should be your next step. Banks, especially house banks, open their drawers like an employed insurance salesman and only offer the products of their breadwinners. Financing brokers, especially those working independently, have a wide range of options; financing that is tailored to personal needs is the goal of any good consultation (about 2.5 hours). It is not uncommon that “normal” financing (free from subsidies) in different combinations provides the better solution for the personal situation. Ultimately, the monthly burden is always decisive, not so much which subsidized funds are included in this sum "X".

*ask Aunt Google and many sites will help you with the decision

Kind regards

Thank you very much for the answers.

Nevertheless, I would like to add that it is not about a direct answer to my project - of course, it is very personal and individual.

I am asking myself whether a 95% financing is even conceivable under the given circumstances - here I am interested in possible experiences and opinions.

Of course, I could make it easy for myself and say:
1) I have this
2) I want that
3) To the bank - Ok or not Ok

But I consider that to be relatively "black / white" thinking and hope for comments or opinions that either strengthen us in the project or not.

Best regards, Villariva

Can no one else express themselves or do they not want to?

Please clarify if we are missing any further information here or if our post is somehow completely off!?

I am a bit surprised that we are getting so little response here :confused:

Hello Villariva,

the net income is sufficient, the equity is not, why don't you have more?

To answer the question right away: With 1,400 euros, we still dare to hold on to the property in case of a possible loss of income.

So quite simple, from next month save 600 € plus the second income, after one year you will then have almost 20% equity and know whether the burden is bearable in the long term.

Hello 6Richtige,

absolutely correct, the equity is actually not enough. We simply dealt with it too late and are now facing a possibly short-term decision, as there are not many building plots left in our preferred building area.

I do not quite understand your calculation regarding equity formation. You say that in one year we would have 20% equity = 57,500 / a = 4,750 / month.

What did you mean by that?