Equity understanding problem

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.

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%

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.

Correct. So why give the kitchen bill to the bank? Just pay it yourself and everything is fine.

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.

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.