Equity understanding problem

(now I have to respond once more, otherwise misunderstandings will probably arise here...)

Of course he can go buy a Porsche with it, but then it is no longer a building loan and therefore runs under different interest conditions

And before there are more misunderstandings: YES! Under the same conditions!

1) The collateral (property) is the same, the borrower is the same, so the risk is identical and thus the condition is exactly the same.

Maybe the condition is even slightly better if, in addition to the property, a security interest for the Porsche is added.

It is even a loan under the Residential Real Estate Loan Directive!

So please do not make false statements if you do not know.

Why don't people just finance the kitchen at some furniture chain, they always advertise 0% financing. Or are the financings so tightly structured?

Why "the people" do or do not do something somehow, I can't tell you. Can you tell me why some people in this thread cannot engage with this calculation example?

Replace the word "Küche" for yourself with "non-value-increasing non-financeable additional costs". The furniture chain might finance the kitchen, the notary fees, the topping-out ceremony, etc., but not that. And in this example, the financing is then rather tight from your point of view. If it comforts you, replace the numbers from my first example so that the plot cost 300,000. Then the loan-to-value ratio is 56%. Or you leave the example as it is and I tell you that the builder in the example will also be a senior manager starting next month earning 10,000 euros net. Before, he was a part-time warehouse worker and couldn't build up more equity. Then the loan-to-value ratio of 84% might not be good as a start by comparison, but the financing is also not tight. Doesn't matter.

Hello,

the "people" are partly experts and/or have already financed themselves and have gone through your question many times.

You can twist and turn it as you like. In the end, every bank decides differently here. You shouldn't care whether it is 80 or 75 % financing. What good does it do you? Nothing. Why? It depends on the interest rate. Bank A calculates 80 % financing and offers you 2 %. Bank B with better financing 75 % offers 2.2 %. Better financing, worse interest rate. There is no universal interest rate and financing ratio. Every financial institution calculates differently.

Regarding your problem with equity capital. You have a very good starting position. There are 2 possibilities. Financing the movable items with a consumer loan, 0 % financing from the kitchen builder, or from the house bank. Simply increase the loan and communicate WITH the bank BEFOREHAND that you need money for incidental building costs and, for example, the kitchen. If you just do it like that and it comes to payout, it either leads to a problem or the bank recalculates because these items are not value-enhancing.

The clever trick was the knot in my head that the Musketeer untied, that I was deducting these costs from equity beforehand. Even if I then only state the property as 95,000 Eur as in the example, although it cost 100,000, or communicate that accordingly and thus provide more upfront. It was precisely the "providing more upfront" that was not clear to me. Of course, this must be discussed beforehand.

The clever thing was the knot in my head that Musketier untied, that I was deducting these costs from equity beforehand. Even if I then state the property as only 95,000 EUR as in the example, although it actually cost 100,000 EUR, or communicate this accordingly and thereby advance more funds. It was precisely the "advancing more funds" that was not clear to me. Of course, this must be discussed beforehand.

We also first paid for the property, incidental construction costs, and the first partial installments of the general contractor from the equity to be invested and from reserves. We would have been foolish to pay interest already while the money was just sitting in the account. Only later did we submit the invoices to the bank and got the money back for the reserves. However, the bank generally pays out to us and not to the general contractor. Some banks transfer the money directly to the general contractor. This should be clarified during the discussions regarding the loan agreements on how to handle it.