Construction Financing Options - Experiences / Recommendations

I can't do it either xD Sorry.

Stupid, the old account could have done it.

Morning! We have become a bit more concrete regarding the plans. Unfortunately, even now we are already more expensive in the cost estimate than specified. Therefore, we are now calculating an additional 15% buffer on top of the estimate, which of course adds up significantly. If possible, I would like to know your assessment of our plan to tackle the financing once again. Because in the next two weeks we need to finalize the financing. For this, we have appointments with a few brokers and banks. Here are the parameters again:

- Plot of land worth €230,000 already available (financed from equity)
- Construction costs including all incidental construction costs, outdoor facilities, kitchen, and furniture amount to €800,000 including the 15% buffer
- At the beginning of the financing, we will contribute at least €150,000 equity ourselves. We would like to divide the financing into different components:

[*]A KfW-55 loan of €120,000 including the €18,000 repayment subsidy with a term of 30 years and 3% repayment
[*]A regular annuity loan of €180,000 with 15-20 years fixed interest period and 3% repayment
[*]A variable loan of €350,000, because this amount will be available after 2 years and we would like to fully repay this component early. (What conditions can we expect here?)

- Monthly net income averaging €12,000 p.m.; the (small) catch is that after 2 years the €350k will definitely be available, but the net income will shrink to about €4,400.

Is the above-mentioned approach workable? And is it even possible to structure the components this way?

Hello,

so the building blocks can be done like that. With a net income of 4.4k, servicing the 300k is no problem. With ancillary costs and reserves, you will end up at around €1,500 per month all in.

Even better would be to still have the 12k and then finance the 350k normally, if possible. The difference of 7.6k per month = 91.2k per year is of course significant. You can work properly with special repayments and you would have everything paid off in 10 years. However, I do not know what is behind the difference of 7.6k per month.

You can approach it this way, although I would not make the 3rd component variable. The conditions here are often >3%.

The better solution is for you to choose an interest rate lock-in of 2 or 3 years for this component, depending on when you have the funds for it.

Alternatively, and if the conditions are suitable, one could also take 5 years at the Commerzbank (usually significantly cheaper than 2) and buy the 100% prepayment option (surcharge about 0.5%), which can be used 2 years after full disbursement. Here it again depends on the construction time, as it can quickly be 3 years.

Hello,

so you can do the components that way. With a net income of 4.4k servicing the 300k is no problem. Including additional costs and reserves you will end up at about 1,500€ per month all in.

Even better would be to still have the 12k and finance the 350k normally, if possible. The difference of 7.6k per month = 91.2k per year is of course big. You can work properly with special repayments and you would have everything paid off in 10 years. However, I don’t know what is behind the difference of 7.6k per month.

Thanks for your contribution. As soon as I work again, an additional 2k in part-time will come in. Of course, something will then also change accordingly for my husband because of the tax class. Nevertheless, we would then be at about 5,200 per month. Yes, the salary downgrade and the special payment are directly linked and there are reasons for that. So you also see no problem with the reduced income at 300k?

You can approach it that way, although I wouldn’t make the 3rd component variable. Conditions here are often >3%.

The better solution is that you take an interest rate fixation of 2 or 3 years for this component, depending on when you have the funds for it.

Alternatively, and if the conditions are suitable, with Commerzbank you could also take 5 years (usually significantly cheaper than 2) and buy the 100% special repayment right (surcharge about 0.5%), which you can use 2 years after the full disbursement. Here it depends again on the construction period, as it can quickly be 3 years.

Oh, okay. If the variable loans really are over 3%, your latter suggestion sounds very reasonable. What conditions would I get if I took the above-mentioned variable loan with a 5-year fixed interest rate including the 100% special repayment right?

If you take the 2 years and it fits with ING (framework conditions), you will receive 0.76% for the 2 years.

The Commerzbank offers 1.09% for 5 years with a special repayment option. Here you have the advantage that if the money comes a little later than after 2 years, you don’t have to deal with interim financing.

For 20 years, you can expect around 1.3x% without knowing more right now.

The variable loans range between 2.5% - 4.25%.

IMPORTANT: Some banks have regional discounts, so conditions vary depending on the location of the house.

Variable financing doesn’t make sense in my opinion and purely mathematically.