Financability of a construction project

Hello everyone,

I would also like to address you to examine the fundamental financing possibilities of a construction project or the purchase of an existing property from different perspectives. I am grateful for any feedback.

The following situation
ME: 30 years old, single, employed full-time and with the company for 10 years - current net salary: 3,500 EUR, 50% owner of a single-family house (equivalent value: approx. 150K EUR)
My partner: 29 years old, single, employed full-time and with the company for 3 years - current net salary: 1,500 EUR
Equity: 15K EUR

No children / desire for children,

Region:
Rheinkreis Neuss - preferably Kaarst

Land costs: approx. 100K EUR plus additional costs
Construction project: new single-family house "Flair 113" from Town & Country (turnkey), list price 121K EUR --> I rather expect 180K EUR
No luxury necessary

Alternatively, existing property up to 280K EUR plus additional costs

I plan in the near future to present these key data to my house bank to approach the general topic of real estate financing in a first step – basically, I want information on whether such a step makes sense under consideration of the framework conditions or what must be fulfilled for it to make sense.
The fact is that only my salary is to serve as the basis for the calculation – and only I will be listed in the land register accordingly.
What is not yet completely clear to me is how and if the 50% ownership shares can be positively factored into the financing – possibly through a lower repayment interest rate at the beginning. A mortgage is excluded, however.

How could public funds, such as the KFW loan for a self-used new construction project, positively flow into the calculation?

As mentioned above, I am grateful for any comment to gradually fight my way through this jungle.

Many thanks & best regards

Hello, shan!

The 50% ownership of the existing property can be used as collateral by you, serving as additional security. With a 60% loan-to-value ratio and the market value realistically estimated by you, that would be 150K€ x 0.5 x 0.6 = 45K€.

Your/Your equity would then be set at approximately 60K€, which would be about 20% of the total investment. Together with your salary, in my opinion, that should work.

If not, you just have to save 1500€/month for 2 years, which should easily be possible for you and would increase your equity by a solid 36K€ in 2 years.

Regards
Dirk Grafe

Hello Shan,

what is still missing in your cost breakdown are the incidental construction costs (there are plenty of lists in the forum), costs for the interior finishing (walls, ceilings, floors), outdoor facilities, furniture, kitchen, etc. You should read up a bit on this in the forum, as quite a bit can quickly add up.

Whether you can finance the house also depends on your current savings rate (so far not much equity saved), your cold rent, and your lifestyle. You should also give that some thought and – if you want well-founded feedback – post something about it in the forum. There has already been quite a bit written about this in the other financing threads.

KfW Program 153 can usually be integrated relatively well and is also subordinated and attractive. Otherwise, you should try to improve your equity ratio a bit more ;-)

Best regards Jochen

If the bank is not allowed access to the house, it will not help you with the financing. Unless you sell it and use the proceeds as equity.

As I said, you should inform yourself again about the costs, just skim through the four subforums here (Baufinanzierung).

Following situation
ME: 30 years old, single, full-time employed and in the company for 10 years - current net salary: 3,500 EUR, 50% owner of a single-family house (equivalent value: approx. 150K EUR)
My partner: 29 years old, single, full-time employed and in the company for 3 years - current net salary: 1,500 EUR
Equity capital: 15K EUR

Land costs: approx. 100K EUR plus additional costs
Building project: new construction single-family house "Flair 113" from Town & Country (turnkey), list price 121K EUR --> I rather assume 180K EUR
No luxury necessary

Alternatively existing property up to 280K EUR plus additional costs

The fact is that only my salary should serve as the basis for calculation - and only I will be listed accordingly in the land register.
Only it is not yet quite clear to me how and whether the 50% ownership shares can be positively included in the financing - maybe through a lower repayment interest rate at the beginning A mortgage is however excluded.

The 50% ownership of the existing property can be leveraged by you, thus serving as additional security. At a 60% lending value and your realistically estimated market value, that would be 150K€ x 0.5 x 0.6 = 45K€.

Your/Your joint equity would then be considered at approx. 60K€, which would be about 20% of the total investment. Together with your salary, that should be feasible in my opinion.

Hello Dirk,

if I read it correctly, does not want a mortgage/land charge on his 50% property. Thus, it would not be considered as equity.

If the partner’s salary is not to be used for financing - can the 15K be used? (although this probably would not even cover the first additional costs)


Do you have any additional free equity?
What is your current savings rate?
Do you rent or live in your 50% house? If renting - how much is the current cold rent?
Are there any additional loans (e.g. regarding the 50% single-family house) / liabilities?
Would selling the 50% single-family house be an alternative?
You don't want children?! Are there already any “on the loose”? (=maintenance payments)
The partner’s salary shall be excluded - do you want to cover all living expenses solely from that?

I assume full financing = 280,000 Euro.
Roughly, at 6% annuity (interest + repayment) a burden of 1,400 Euro per month would be expected (term 20 - 23 years). Possibly you could also choose a 5% annuity (approx. 1,170 Euro per month) - then the term would be longer (estimated approx. 30 - 33 years).

So long for now.
f-pNo

Basically, all important points and questions have initially been raised. : Since the ancillary building costs are not yet included, I think it will even be more than €280,000, because the €15,000 equity will very likely not be enough for the incidental costs. The question that arises for me is: Why do you only have €15,000 equity when you earn so much and have been with the same company for 10 years? You don’t necessarily have to answer that to us, but to yourself.