Final Loan Agreement - Which Time?

Hello dear house building forum,

we are going to build a prefab house using timber frame construction.

The purchase contract has been signed. The architects are currently preparing the plans for review by the house builder.

We have €100,000 in equity and need a loan of around €250,000.

It will take well over 2 years until the house is completed. Of course, the house builder wants a financing certificate from the bank.

We have already obtained initial offers from the credit institutions and are now wondering whether we should conclude the loan agreement now. We have offers with 12 and 24 months of interest-free standby period.

At what point did you conclude your loan agreement?

What should be considered here? Any golden rules?

We signed the loan agreement shortly before we needed the first money.

and need a loan of around €250,000.

Your house project only costs 350,000? Would you like to explain that?
Regarding your question:
What about the ancillary construction costs? You must already pay surveyors, earthworkers, and so on...?!
That can be covered with the equity.
Have outdoor facilities, paving, and garage also been planned?
When does the first installment have to be paid?

I would create a monthly table showing when which costs occur. And ultimately, you also have to talk to the bank about whether they recognize already spent equity as equity at all.

But in the beginning, the question stands as to how the company's construction payment plan looks and how much total funding, including ancillary construction costs and other expenses, is needed. Because the €350,000 is too low to be believable.

I think it was 120m².

Total costs: €424,000

Equity: €100,000

I would find it interesting why you now only need a €250,000 loan.

Regarding your actual question: I signed the loan agreement at the last minute.

You can weigh two things:
- How easily can you get the loan, or could something go wrong? I think in your case it looks good at first with the high equity + land. It would be a risk if there was little income, or if you are close to retirement or something similar.
- How much do higher interest rates hurt you if they rise? Small changes do make a noticeable difference.

@ypg I believe it was 120m².

From this thread? Why is there no answer from you in that thread?

Maybe I am thinking too conservatively, but I wonder, how can someone enter into an obligation (purchase price payment of €350,000 plus X) if they don't even have the money for it? For me, the financing must be secured first (whether from equity, debt, or a mixture of both) before I sign a construction or purchase contract.

And on the other hand, my general contractor also did not require a financing confirmation, because he, just as down-to-earth, assumed that the obligation the customer enters into will also be honored. Trust for trust.