Construction financing through intermediaries or local banks

No. I disagree.

That’s nonsense! I am very surprised by your statement and very puzzled. Construction costs are currently always above the real value, as are land prices. That means construction costs plus land costs are basically always higher than the estimated market value of the property after completion. The bank doesn't care at all if you invested 750k euros when in the end the appraisal value is only 600k euros. The LOAN VALUE will always be calculated at the 600k euros. You should know that too. The banks also adjust the conditions accordingly, that's a fact. For example, you calculated with a 79% loan value, but the bank comes to 85%. So, suddenly the bank will offer conditions in the range of 80-90 or 80-85, depending on the subdivision. Don’t believe it? You should.

Why should a financing applied for with a 79% loan value be rejected by the bank if they would also finance it with the somewhat higher interest rate? Which platform do you use?

Dear

You are talking about the LOAN VALUE: it will be as you described, meaning currently construction costs are incredibly high, so you pay more for the land = THEREFORE for the BANK the LOAN VALUE is currently significantly lower than the COST/CONSTRUCTION VALUE.

But I am talking about conditioning, which VALUE the banks take for the CONDITIONS, and here the banks take the construction value.

So I tell you how I currently work:
A customer comes to me and tells me: I want to buy this house here, it costs 600,000€, I have 100,000€, and want to finance 500,000€.
The first thing I do then: I appraise the house
So I can see what deviation I have between VALUE and purchase price here.
If I end up at 500,000€, then I have a reference value, and I know most banks will move +/- 50,000€ here...
(I once had a property where the difference between two banks was about 25%, meaning according to their appraisal = their loan value!)

Currently, there are banks that finance a maximum of 100% of the determined value, meaning if I come up with 500,000€ here, then these banks are probably out because if they appraise below 500,000€ here, they are out.

That means I have to use a bank that for example would give us the 500,000€ even at 450,000€ valuation
(By the way, there are banks that finance up to 250,000€ above the loan value, meaning if they assess the value as 500,000€ but the purchase price is 750,000€, they would finance up to 750,000€ (then at 150% loan-to-value, or in other words: for the bank 50% unsecured share!) here the bank would give us the 750,000€ with 100% LTV conditions (they don’t charge an interest surcharge here!)
That means Appraisal 500,000€, Purchase price 500,000€, Financing 500,000€ = 100% financing conditions
If the value is 500,000€, purchase price however 750,000€, financing 750,000€ = 100% financing conditions
And now it comes:
Value: 500,000€, purchase price 750,000€, financing only 600,000€ (then LTV is 120% (600k on 500k), but conditions LTV (600k on 750k) is 80% LTV for the CONDITIONS! (so much better conditions)

Now back to your question:
- I use all platforms because I prefer direct access to the banks
- only for follow-up financing my clients get conditions according to the loan value (I tell the clients that the banks CAN still adjust it, not "must" if there is a deviation in value)
- new builds or purchase = my applications are always based on purchase price/construction costs, then those banks are selected that fit into the "value range," meaning the banks that would reject because of loan value are sorted out!
(By the way, some users here in the forum can confirm this who have contacted me because banks they asked or the broker they previously used received a rejection due to the loan value!)

So with me, the clients get presented the bank that calculated the interest rates based on the construction price but accepts big deviations in the loan-to-value ratio,
(The earlier example: 900,000€ construction costs, loan value at the bank: 500,000€, financing: 600,000€; these clients finalized the financing last week, 1.99% fixed for 20 years… the bank also approved it as applied)

As I said, I have been doing real estate financing for a long time, and the only adjustments were when doing follow-up financing (or if the application would have to be made new because the client’s data changed… so the current daily conditions were taken) BUT NEVER because of the loan value on new builds/purchases.
With me there is this: either the bank approves it as applied (even if it took 2-3-4 weeks to review it; here too I can give an example: follow-up financing applied mid-February, approval only last week, for 10-year fixed interest the client still got 0.75%… extremely long processing time… but conditions held as applied…)

Therefore please always distinguish:
when does the bank make conditions according to the loan value (through platforms I use, only for follow-up financing)
and for purchase/new build the loan value is always only interesting for the approval (for me and the clients).

PS. Got quite long… but here comes a note:
If you go to a branch, want to finance 400,000€ of a 500,000€ purchase price!
The advisor does an appraisal and also comes to 400,000€ value.
That he then gives you conditions for 100% instead of 80% (can happen, but doesn’t have to… I know for example my contact person at the local savings bank sometimes has a 0.40% spread in the offer… he offers the client 1.20% (as example) although he could also offer 0.80%... but this way he can earn more "margin" for the bank (if the client agrees to the 1.20%…))

So, enough excursion ;)

My bank has estimated and appraised the value of the property at 880,000 euros.
It was purchased for 820, minus 32k subsidy = 788,000.

Can that be? Is the interest rate then better?

depends on the bank,
here a savings bank or cooperative bank = would rather offer a cheaper interest rate.

the private ones, or big players, don’t care
i.e. property value: 400,000€
purchase price: 325,000€, financing: 325,000€ they said bluntly: customer finances 100% of the purchase price, so 100% financing (for that the follow-up financing will probably be at 60% term)

they also say:
currently on the market the purchase price is 10-20-30% above the VALUE of the properties, we take the better value (purchase price) for conditioning for the customers so 99.9% of the customers benefit
the 0.1% who buy cheaper than the value just have to go to the bank that takes that into account (so the few)

Dear
- well, I use all platforms because I prefer direct access to the banks

Thank you very much for your explanation.

Does that mean you go directly to the banks for refinancing, or do you use the market leader portal?

Thank you for your explanations. The bank maintained the follow-up financing for me. 1.14% nominal interest rate for 10 years. The same bank, since everything is in one package, pretty much disregarded the construction costs for refinancing another project and then adjusted the offered conditions up by 0.1%.

Contractually unfavorable is that the loan contract contains an acceptance period of 18 months. Basically, you have to fully accept after 18 months, or the bank could pull back. No new construction project guarantees me a construction time of under 18 months. According to the bank, this is the standard contract and included everywhere, and when the 18 months are over, interest on the provision will be charged. The clause is only standard and probably not used. Well, the conditions are below 1.5% for 20 years... without the increase it would be cheaper.

Thank you very much for your explanation.

So, do you go directly to the banks for refinancing or do you use the market leader portal?

Thank you for your explanations. For me, the bank held the follow-up financing. 1.14% nominal interest rate for 10 years. The same bank, since everything is in one package, pretty much disregarded the construction costs in the refinancing for another project and then adjusted the offered conditions upwards by 0.1%.

Contractually unfavorable is that the loan agreement includes an acceptance period of 18 months. Basically, you have to fully accept after 18 months or the bank could back out. No new construction project guarantees me a construction period of under 18 months. According to the bank, this is the standard contract and included everywhere, and if the 18 months pass, then commitment interest will be charged. The clause is only standard and probably won’t be used. Well, the conditions are below 1.5% for 20 years... without the increase it would be cheaper.

Commitment interest only after 18 months is great. Usually only 6-12 months.

so with some banks it works like this for me:
I just send them the documents and say: will you do it?
The platform is then used for the conditioning and billing (because it is often cheaper)

in individual business it is done more like this, that we sometimes say: can you do condition XY for the customer here, then they calculate it, and there can also be a counteroffer here (but this starts here at the banks, depending on the bank, from 500,000/750,000/1,000,000 financing amount, below that always portal conditions)

and the answer from 23:39 shows the solution for you, why they raised it.
BECAUSE
you don’t have a normal financing (standard) where people just build or buy their first house.

with you it was like this:
1) follow-up financing, here the bank already had the value of the property, i.e. based on the value: the offer, and that was then also made in the contract.

with the house, so
2) they probably first calculated with construction costs/manufacturing costs (offer probably interest at 1.40%), here comes a special feature: you already financed an object with them, i.e. here they could consider the 1st object as additional security.
so you can now imagine how they probably calculated
(example calculation from me....)
object A: value 300,000€, financing (follow-up financing) 200,000€
expiration: 66.66%, thus offer with 70% expiration, you accepted it. contract also with the same conditions, since nothing changed there.

object B:
manufacturing costs: 500,000€, financing 400,000€ (just as an example) so at 80%
they then probably also included object A as additional security here (in the contract it should probably say that all securities the bank has, so probably also object A, are liable here for the contract for object B as well... check the contract more closely...)
thus they said: ok, we can also offer 75% expiration here (400+200 credit, securities: 500+300) = thus condition 1.40% in the offer!

after that they made the valuation for object B and found out: ok, it is only worth 450,000€, so they can’t go with 75% expiration = contract then at 1.50%

the bank here basically does not see it as NEW FINANCING, where you go by the manufacturing value/purchase price, because you already have financing running there.
this is rather the special feature and rather unusual.
(most people only have one apartment or house... not 2 ;)
thus the financing was done like follow-up financing = here the bank goes by the lending value, which is normal.

(that is what you should have mentioned in your first message, then we would have cleared it up quickly).

if you do the financing for object B at another bank than object A, then they would make the conditions exactly according to the manufacturing price/purchase price, regardless of how the lending value comes out.

So one should think about it more carefully... in your case I assume it was still slightly cheaper than doing it completely somewhere else, because probably object A is already well paid off?

both properties are independent of each other, there are no references in the contracts. So I could sign A and not B (doesn't make sense, since after the weeks of reviews the conditions have risen by almost one percent)

Property A was newly and significantly worse evaluated by the bank than VdP and others do. But it didn't matter because even with the miserable evaluation the loan-to-value ratio is under 50%.

Property B is a mystery, possibly just bad luck with the processing because it is probably unusual. It really is a new construction financing. The selection of banks was already limited in February ;)