Construction project 400k: How much to add floors?

You don’t mean equity but rather the financing requirement?

The so-called loan-to-value ratio, i.e., the ratio of the house price (including incidental construction costs) to the financing requirement.

If the house costs 350,000 euros and you need a loan of 300,000 euros, that is 86%. Note: It actually concerns the ratio of the house value from the bank’s perspective to the financing requirement. What exactly is included in this value is beyond my detailed knowledge. And of course, the total budget must always be set higher (additional purchase costs, financing incidental costs, "kitchen", ...).

The message is actually that it is worthwhile to mobilize as much equity as possible and that sometimes a few thousand more equity can affect the interest rate.

You can also fix the interest rate for 20 years and if after 10 years the interest rates are still low, you can terminate the loan and enter into a new one for 10 years. In that case, you will have paid "too much" for the first 10 years, but in return you have secured the safety for 20 years. Advantage: After 10 years, the loan-to-value ratio should be significantly better than it is now.

Advantage: After 10 years, the loan-to-value ratio should be significantly better than it is now.

The loan-to-value ratio is of course even better if more has been repaid in the first 10 years due to the lower interest rate.

We have two loans, because it is a two-family house and one residential unit is rented out by us. So there are tax reasons (clear separation). The loan for the rented unit is not amortized, but a special repayment of 5% p.a. is possible (interest is tax-deductible here). This loan corresponds to the value of the residential unit, basically a full financing of the rented unit (previously discussed with the tax advisor). The loan for the unit we live in, on the other hand, is a full amortization over 10 years, with very low interest (0.95%), which of course is not tax-deductible. On this, we can also make 5% p.a. special repayments, which we plan to do in order to finish it after 8 years.

Theoretically, it might also make sense for you to take out 2 loans. For example, a small full amortization over 10 years. And the rest with longer term and low repayments in the first 10 years and of course an option to change the repayment, so that after 10 years the repayment on the longer-term loan can be increased, so that the total rate is the same as in the first 10 years (or possibly higher). The advantage would be that part of it would be financed with a favorable 10-year full amortization. The rest is secured for a long time. But I don't know if this is practically feasible. This would have to be answered by a financing expert here or the bank, whether such a concept is feasible and advantageous.

[QUOTE="Johnny7, post: 255905, member: 44996"

Theoretically, it might make sense for you to take out 2 loans. For example, a small full repayment loan over 10 years. And the rest for a longer term with low repayment in the first 10 years and of course the option to change repayments, to increase the repayment on the longer-term loan after 10 years so that the total rate is again as it was in the first 10 years (or possibly higher). The advantage would be that part would be financed with a cheap 10-year full repayment loan. The rest is secured for a long time. But I don’t know if this is practically feasible. A financing expert here or the bank would have to answer if such a concept is feasible and advantageous.[/QUOTE]

I just did a rough calculation. The two-loan approach (10-year full repayment and long-term) doesn’t work. It only works if you can afford a very high total repayment.

Therefore, I think one loan is enough. I don’t want to recommend a term for you. Everyone is different. Two people, three opinions. So just sleep on it and weigh the arguments mentioned here, whether shorter or longer. Negotiate well with the bank, take the offer from the broker with you to your house bank, and see what’s possible. That’s how I did it.

At this point, thanks again to all involved. Appointments with financing advisors and the house bank are already planned, your assessment of the acceptable budget helps me additionally. I will report on what will come about.