Construction financing with life insurance?

@HilfeHilfe

if you had read the post properly, you would realize what Goldi needs the monthly surplus for.

we want to buy an older house and gradually renovate it according to our ideas.

In case you want to work on the house yourself, I find Goldi’s approach quite worth considering. Low loan amount, low repayment, and doing the essentials to be able to move in. Then gradually expand.

What would be the alternative:
Have the house renovated immediately by craftsmen.
That would require a high loan, which would result in a high monthly burden due to interest and repayment.
But that would lead to much higher costs than Goldi’s variant.

Even if the insurance does not yield 100k, but only the paid-in capital, the risk with the loan amount is still manageable.
I would simply ask independent financial service providers, the house bank, and maybe also the insurance company itself about such a variant.

We are certainly aware that the life insurance is being assigned. What's wrong with that.

No, it's not a contradiction, of course we are doing very well today but when you have experienced how quickly things can change..
We have both experienced what it is like when suddenly everything is different overnight.
I myself have had to make decisions (I was a department head with personnel responsibility) when 10 people who never expected it suddenly became unemployed, etc.

I can also cover a small monthly burden with side jobs and maybe pay my insurances myself or live off savings, etc. But if I have 1000€ (which wouldn't be an issue now and maybe never would) and then become unemployed, then I definitely have to go to the employment office and then it starts that you lose everything.

I recently experienced this myself with a 58-year-old man. They financed their house with a monthly payment of 960€ and still had to pay for 5 more years until they were done. He worked for 30 years in the same company (car mechanic), she worked in an office. She got cancer a few years ago, was sick for a long time (of course) and in the end she was unemployed and since she is not in good physical condition she can't do very heavy work. She hardly has any chance in the office anymore, etc. His company declared insolvency, was sold and he was laid off (without severance!). He also couldn't find a job and slipped into welfare benefits (Hartz 4). So, now he has to sell his house because he can no longer pay the installments and with Hartz 4 buying a house is simply not possible. No bank will give him money, etc. Almost at the goal, everything gone!

Selling the house doesn't happen overnight either, he is close to foreclosure, which of course brings much less.

Pension gone, job gone, everything gone.

I have experienced such things multiple times, this is not an isolated case.

That's why we prefer to think extremely pessimistically than to end up like that in the end, the chances of being able to avert something like this with a low burden are many times higher.

Even if it seems pointless to some now..

But this is not about having to explain or convince anyone here why we think or want it that way, but rather whether anyone here has experience with something like this.

@ Musketeer

thank you, we think exactly the same way.

But it is also clear that this approach does not correspond to the average consumer and meets with incomprehension.

Even if the life insurance ultimately returns the deposits, since we also plan to take out something new, at least half would definitely be covered. With a loan of €100,000 secured by life insurance and a monthly burden of e.g. €400, we could save well and at the same time continuously increase the value of the house, etc.
And all this in absolutely safe waters, no matter what happens.

The worst case would be that in the end, despite life insurance, there is still residual debt and the newly saved money has to be used for it, but then it still belongs to you and at least you don't have to pay rent from your pension.

Illness, unemployment, etc. can come as they please, we would be safe.

And if everything goes smoothly and nothing happens, we would have a neat little house and quite a bit of savings to live nicely and really well.

You had to check the market to see what products are available for you. For this, you should steer the advisor towards the following product (not the other way around). Financing is currently available with a term of up to easily 20 years, and at a favorable interest rate! You should just install a flexible module that allows you to adjust the rate flexibly (min. and max. should be checked, as well as how often you can change, which also needs to be examined). Without violating the financing contract! This will cost you a few tenths of a percent. The security for the bank can only be provided through the risk life insurance.

If you now compare the two cases and calculate the final sum after the financing is fully paid out, the decision to choose a financing option will be very easy for you)). And you can at least treat the craftsmen (instead of the bank) a little better, and automatically get better quality.

Have fun building
Waldemar

To make it clear again.

We buy, for example, a house for €100,000 and provide the life insurance [LV] at its current value of €100,000 as collateral. We need a bank that basically pre-finances the €100,000 for us. For this, we pay, for example, €400 per month (until the end of the insurance). With our surplus of currently at least €600 per month, we take out something new to save, say for €300 per month, and put €300 monthly into the house.

This would mean that in 20 years we have already paid off €96,000 with €400 monthly, and at the end, the remaining debt is covered by the [LV]. At the same time, we have newly saved (about €72,000 calculated without any interest) and have upgraded and maintained the house with the same amount again.

If something happens, we can first suspend all savings and do only the necessary on the house, so we only have to cover the €400.

Maybe explained like this, it is easier to understand.

You had to check the market to see what products are available for you. For this, you would have to steer the advisor towards the following product (not the other way around). Financing options are currently available with terms of up to easily 20 years, and at a favorable interest rate! You should just include a flexible module that allows you to adjust the rate flexibly (check min. and max., how often you can switch also needs to be checked). Without violating the financing contract! This will cost you a few tenths of a percentage point. The security for the bank can only be provided through the risk life insurance policy. If you now compare the two cases and calculate the final sum after the fully paid financing, the decision to choose a financing option will be very easy for you)). And you can at least treat the craftsmen (instead of the bank) to a bit more, and automatically get better quality.

Have fun building
Waldemar

It is clear that you have to check the market to see what is available, that’s exactly why we are asking here if anyone has experience with this or knows anything about it.... That is exactly the reason why we wrote here. Even if there is no interest at all, at least half is already covered by the deposits. So for our model it may be annoying but it is completely irrelevant what interest the insurance will yield or not.

The alternative would be to buy a house for e.g. €100,000 plus say €50,000 renovation, so take out a loan for €150,000, repay it with at least €700–1000, and still the house has to be maintained, etc.

Where have I gained anything? In my opinion, that is exactly what we don’t want, nothing may happen there.