Construction financing for house building in Brandenburg with difficulties

  • Erstellt am 2020-10-17 12:45:13

Muldenboy

2020-10-17 12:45:13
  • #1
Dear forum participants,

we want to finance the construction of a house. Unfortunately, the first two financing requests at banks (HvB and ERGO) were rejected. The rejections were justified by a too low property value and thus a cap on the loan volume.

I am therefore turning to you today to get an assessment different from that of our financial advisor, whether we perhaps have too high expectations or are underestimating the whole project. So far, financing brokers have always reflected to us that we have the best conditions. Accordingly, we are currently quite dismayed.

About our situation:

The plot: Last year, we bought a plot (prime plot in the third row) in the western Berlin metropolitan area. A total of 890 sqm, which we financed through our equity. The town has around 12,000 inhabitants, a direct train connection to Berlin, and it takes about 30 minutes by train to Alex.

We paid 190 €/sqm. Since then, we have prepared and developed the plot, etc. We have paid around 55k for incidental purchase costs and preparations, including a partial demolition, utilities, construction road, etc. So in total 230k so far. The plot is now ready for construction. Conveniently, the standard land value has increased during this time, so the plot is now worth 220 €/sqm (203,000 €) and we have included our incidental purchase costs as equity. We wanted to get back 15k of this money (for the utilities) through financing to become more liquid again.

The house: Together with a friend architect, we developed a KfW40+ house. 193 sqm with a single garage, no basement, and a flat roof. The building permit was already approved in summer. The costs for the architect, structural engineering, energy consulting, etc. were paid from our equity, about 20k.

Since then, we have tried to specify the costs for the house construction and back them up with offers. For an upscale standard with wood-aluminum windows, parquet, exposed screed, etc., we come to construction costs including buffer and the remaining architect's fees for service phases 5-8 of just under 510k, i.e., 2600 €/sqm including garage. Additionally, there are outdoor facilities with 20k and kitchen 20k.

In total, we come to a total volume of the project of 820k, of which 260k equity has been paid and we still have another 10-20k left. There remains a need for the house, kitchen, garden of 540k plus about 20k buffer that we would like to finance.

I have created a very, very detailed overview with all cost items and corresponding offers, which I would gladly share elsewhere once we can finally get started.

And yes, it would certainly be cheaper if one lowers demands. But that would be the second step.

Our plan: we intended to finance over 30 years. We got a rate of 1-1.3% through loan brokers. The installment should be 1600-1700 €. With repayment grants and special payments, we wanted to repay the KfW loan after 10 years and shift the rate (400 €) to the annuity loan. Then we would be debt-free after 25-28 years.

General info about us:
We are three people (36, 34, 3) plus a child in development. I work full-time with permanent employment. My wife works part-time and is temporarily employed until the end of 2022. Unfortunately, this is due to ministry-funded projects. Continued employment in new projects (after 3-4 years project duration) is usual, and according to the banks, that was not a problem.

Income and asset situation:
I earn 3117 euros net. Plus holiday and Christmas bonuses.
My wife earns 2430 euros net. Also plus Christmas bonus.
Child benefit 204 euros.
We still have 15k equity plus 15k which we want to get back from the financing through invoices to be submitted.

With the second child, our income situation will certainly change at first, but it is planned that my wife works again at the current level once the second child is in daycare. Luckily, we have flexible employers.

Expenses situation:
Overall, we have 5784 € available monthly without bonuses.
Bonuses per year are fixed: 6.5-7k.
Rent and fixed costs: 2000 €, including 135 € BAföG until 2024 and rent 1250 €. The rest are utilities, insurance, car, etc.

For food, drugstore, vacation, clothes, miscellaneous we have: 1784 €, which I have divided into budgets that we rarely exhaust.
Savings rate: 2000 € plus what we save monthly in other budgets, on average about 500 €.

I keep a monthly household book and record all expenses. This way, we can manage well. In addition, we have a relatively new car, paid in cash, and no further loans or debts.

Now we could basically start construction and already have companies. Unfortunately, it now depends on the financing, although it was always said: no problem regarding the construction sum and creditworthiness.

However, the HvB capped the property value at 400k and ERGO at 460k.

After the two rejections, a third request is currently running, this time at ING, but only with a 20-year term. However, I fear it might fail again because of the property value. Do you have experience, advice, or assessments for us? Are we so far above the norm with our project?

Thank you very much!
 

nordanney

2020-10-17 12:59:54
  • #2
It is probably quite simple. The house is too expensive/large for the region. There are market adjustment discounts that cause the property value to collapse. You will need a lot of luck to find a suitable bank that wants to finance at a high level (probably with an interest surcharge). P.S. 890sqm at 220€ (developed) = T€ 196 land value
 

Muldenboy

2020-10-17 13:21:14
  • #3
Thank you for your assessment!

I can understand, although I had understood the proximity to Berlin and the equity, also in the form of the property, as advantages.

That means either more equity and/or trimming down and continuing to look for banks. I would have expected exactly that the financial advisors would take over, knowing which bank is suitable.

Regarding the PS: I referred to the bare land value that the advisor pulled from the system. It was
at €203,000.
 

moHouse

2020-10-17 15:48:59
  • #4


Is that really not a problem? After all, your wife contributes more than 40% of the household income. In isolation, it might be manageable. But in the end, the bank always looks at the overall package and assesses the risk. And that might, after all, become a problematic factor...
 

Muldenboy

2020-10-17 16:21:40
  • #5
I can only recount here what the bank advisors have told me. So far, it was due to the property value.

But of course, I cannot rule it out. With [ERGO], we also had to write a statement and explain the background as well as the type of limitation. Naturally, we are not happy about it either.
 

moHouse

2020-10-17 16:41:02
  • #6
Ah ok. So the banks have at least dealt more thoroughly with the limitation and discussed your individual case directly with you. That's already a good sign...

How I came to that: at the beginning we had gotten stuck on an existing property. We got 2 rejections with the reason that the price of the property was too high. After inquiring, it ultimately would have been okay - if we had had more equity. So somehow everything plays a part.

What I'm still interested in: are all additional construction costs (except for the garden) already included in the 510,000 for the house?

And your financing advisor: is he specialized in house construction? We also switched at the time because we quickly realized that ours was good for existing properties but had the wrong connections/experience with the banks for construction.
 

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