Equity understanding problem

  • Erstellt am 2016-09-28 17:17:33

StefanW76

2016-09-28 17:17:33
  • #1
Hello everyone,

until now a silent reader, I would also like to ask a question. Further down there is a similar post, but it does not clarify my question.

I’ll give the following example. Assume these are all the costs incurred until moving in:

House construction costs: 300,000 Eur
Additional construction costs: 30,000 Eur
Kitchen: 15,000 Eur
Land: 100,000 Eur
Liquid equity capital: 10,000 Eur

Assuming I already own the land and it is fully paid for, then I need 345,000 Eur to realize the above. The land is counted as equity capital with 100,000 Eur, so that makes 110,000 Eur equity capital.
However, the bank only considers house construction costs and additional costs as value-increasing and only finances these. Right? Then I get 330,000 Eur from the bank. Or do I get 345,000 Eur? If I then tell my advisor: transfer 15,000 Eur for the kitchen, he would say that this is not part of the financing.

Now I don’t understand how I come by the remaining 5,000 Eur. What would I state as my equity capital at the bank in this case? Or would I say that the land is worth 100,000 and I only paid 90,000 of it?

Maybe I have a knot in my head right now, so I would appreciate an exemplary explanation in simple words.
 

Musketier

2016-09-28 17:44:16
  • #2
Total project costs including kitchen 455K€

For the bank, the kitchen is uninteresting. Therefore, the breakdown for the bank looks approximately like this:

Land costs 100K€
+ House construction costs 300K€
= Loan value for the bank 400K€
plus incidental construction costs 30K€
= 430K€
less equity 95K€ (110K€ less kitchen 15K€)
results in a loan of 335K€

You have initially invested 5K€ more equity than you actually want to contribute.

The loan-to-value ratio should therefore be 335,000/400,000=83.75%
 

StefanW76

2016-09-28 17:54:48
  • #3
Ok. Understood. Now the project is starting and the little house is being built. I diligently submit invoices. The bank transfers 300,000 for the house and 30,000 for the additional costs over time. Meanwhile, the kitchen installer wants his 15,000. If I now tell the bank, transfer 5000 euros to the kitchen installer, they reply that they do not finance the kitchen at all.
 

77.willo

2016-09-28 18:03:14
  • #4
Correct. So why give the kitchen bill to the bank? Just pay it yourself and everything is fine.
 

StefanW76

2016-09-28 18:33:18
  • #5
But I only have 10,000 Eur now, because my liquid equity was 10,000 Eur at the beginning and so far the bank has paid all the bills. But I need 15,000 Eur. And this is exactly where my problem in understanding lies.
 

bernie

2016-09-28 18:59:17
  • #6
The kitchen costs 15k, but you only have 10k. The bank does not finance kitchens --> you are missing 5k... you can twist and turn it however you want

--> borrow 5k from a private individual.
 

Similar topics
20.07.2011House construction: Equity / incidental construction costs realistic?14
05.02.2014Costs/planning land, additional construction costs, turnkey, etc.27
22.08.2013Plot - Decision?14
19.08.2014Home construction financing - House price and ancillary construction costs27
21.08.2014Is financing without equity realistic?19
06.01.2015First buy the plot, then calmly plan and build...?11
21.02.2015Impacts on loan when equity is in property17
21.03.2016Land Costs - Building and Financing a House29
29.01.2016At what value is the property assessed during financing?24
10.04.2016Property as equity? Living costs with children?19
21.04.2016Is financing with land and equity possible like this?20
17.04.2017Is land and house construction possible with our income?43
05.05.2017Land purchase + house construction possible? Up to 350k equity, 3k net monthly.17
29.11.2017House and property €284,000 financeable?57
17.12.2017Does the land value count as equity? Appointment at the main bank23
11.03.2020Land as equity capital - Worth the wait?10
05.08.2020Financing without equity except for land - Bavaria13
13.10.2020Land available - ancillary construction costs, ancillary house costs, financing?34
06.03.2023Pledge existing property to increase equity?13

Oben