Financing evaluation. Specify total equity to the bank?

Hello everyone,

what do you think about the following scenario?

Background: The two ERW do not want to touch the relatively high equity and also the ETW for now. Of the 560k equity, only the land and acquisition costs are to be invested. The rest should rather continue to run in the depot and in retirement provision. The idea is that the low interest rates are outperformed by the capital market interest and it is better to keep the ETFs running.

General information about you:

[*]Who are you? 2 ERW, 1 child
[*]How old are you? 40, 41, 4 years
[*]Are there children? 1
[*]Are children planned? No,
[*]What do you do professionally? Employee, civil servant
[*]Are you employed, self-employed, retired, housewife, househusband etc...
[*]How many hours do you work? 39 or 30 hours

Income and asset situation:

[*]What income do you have (gross/net)? Net: 13 x 3,900 + 12 x 3,100 => total 7k. On top there is about 6k net (quite stable, but variable)
[*]How much child benefit do you receive? 219 EUR
[*]Other transfer payments such as parental allowance, sickness benefit, etc...? No
[*]How much equity do you have? 560k
[*]How much equity do you want to invest in the house project? 260k

Expenditure situation:
Expenditures that are already included in other positions can of course be left out. This list is not final and can be expanded or summarized arbitrarily. Please make sure to specify all costs monthly, even if they occur only annually!

Housing costs:

[*]Current cold rent: paid-off ETW, market value probably around 170k
[*]Current warm rent currently only maintenance fee 220 EUR
[*]Electricity 70
[*]Gas 55
[*]Water, sewage, garbage fees, street cleaning --> included in maintenance fee
[*]Telephone, internet, mobile phone 80

Mobility costs:

[*]Car loan (or savings rate for a new car) - no
[*]Insurance 80
[*]Taxes 20
[*]Fuel 100
[*]Repairs 60
[*]Miscellaneous 10

Insurance costs:

[*]Private health insurance (also supplementary health insurance, daily sickness allowance etc.) 300 EUR (already deducted above from net!)
[*]Liability insurance (also pets) 10
[*]Disability insurance Yes, her. About 50 EUR
[*]Household insurance 10 EUR

Living expenses:

[*]Groceries 800
[*]Restaurant costs 100
[*]Care/drugstore 200
[*]Medicines 50
[*]Clothing 200
[*]Furniture 50
[*]Daycare/school fees (and meal money) 45
[*]Toys 50
[*]TV/video/audio/CDs/DVD 15
[*]

Savings contributions:

[*]Vacation 250
[*]House 1500
[*]Retirement provision 1000
[*]Hobbies/gifts 50
[*]

Total income and expenses:

[*]Total income 7,925
[*]Total expenses 3,575
[*]Balance 4,930
[*]Of which sum cold rent and dispensable savings contributions (e.g. savings rate for house) 2,250 (1,500 house savings rate and 750 less in retirement provision)

General information about the property:

[*]How large is the land? 440
[*]What are its dimensions?
[*]What is the standard land value? 402 EUR/sqm
[*]New building, old building (year of construction), house type? New building
[*]Garages? 1x
[*]How large is the house? (living area / usable area) 150 / 25
[*]What is the market value of land and house after completion? 800k

Construction or purchase costs:

[*]Land costs 179k
[*]Development costs 25k
[*]Acquisition incidental costs (notary, court, property transfer tax, broker) 3k
[*]Construction costs single-family house 150 sqm x 3,100 EUR --> 465k
[*]Additional construction costs (e.g. house connections, soil surveyor, construction electricity etc.) 10k
[*]Outdoor facilities/terrace, paths, garden design, fences etc... 30k
[*]Financing costs (e.g. fees or commitment interest)
[*]Total costs 712k
[*]Kitchen costs 20k
[*]Furniture, lamps, decoration 1k
[*]Other "non-acquisition, acquisition incidental, construction or additional construction costs" 15k

Cost summary:

[*]Total costs 748k
[*]Deductible equity 260k
[*]Financing amount 488k

Necessary loan details:
(for multiple components indicate for all, if there are multiple variants please clearly separate):

[*]Loan amount 488k
[*]Loan type (e.g. annuity loan, bullet loan etc...) Annuity
[*]Interest rate (p.a. nominal, otherwise effective) ??
[*]Fixed interest period 10 years
[*]Remaining debt at the end of the fixed interest period ???
[*]Fictitious total term until full repayment
[*]Initial repayment rate
[*]Monthly rate 1,600
[*]Prepayments possible? (state amount) No
[*]Repayment rate change possible? (State conditions such as number, repayment rate range)

What do the banks think about this? Should the entire equity be disclosed there

Thank you very much!

Best regards

PS: Happy new Year! :)

So the bank surely has no problem with "only" 260k equity, probably they are even happy to sell you more credit.

Whether that makes sense would be a matter of personality for me. I would sleep better with 200k credit than with 500k. The stock market is not a guaranteed interest.

You are actually speculating by borrowing money from the bank to buy stocks.

That is already bold, especially on the scale of over 300k!

There would also be the intermediate step of holding back only 100k or so.

What is your question now? You have a fully paid-off apartment worth €170,000, over €500,000 in equity, and an income of €7,000 per year. And you want to build economical 400m² at €400 with a fairly modest 150m² house, which you could completely pay for from your equity. Even without equity, that would really be feasible.

What do the banks think about that? Should the entire equity capital be disclosed there

Yes, that makes you particularly creditworthy and you might have better negotiating leverage.

[QUOTE="Hausbautraum20, post: 459590, member: 52454" The stock market is not a safe interest rate. You are actually speculating by borrowing money from the bank and buying stocks with it. That is quite bold, especially in the dimension of over 300k! There would also be the intermediate step of holding back only 100k or so. [/QUOTE]

Sure, there is risk involved. But 0.9% vs. 5-6% return is clearly a pro.

What is meant by us "buying stocks" with it? They are already in our possession and fully paid.

We are borrowing the money for the house, not for speculation.

What is your question now? You have a fully paid-off apartment worth €170,000, over €500,000 in equity, and an income of €7,000 per year. And you want to build a modest 400m² at €400 with a fairly moderate 150m² house, which you could pay entirely from your equity. Even without equity, that would really be doable.

Yes, feasibility is of course given. The primary question is whether the banks will accept deliberately stretching it out like that. With low repayment at 3%, there would still be a substantial remaining debt. I thought Basel 3/4 would regulate that more strictly, due to repayment by retirement age. Another reason why this approach is interesting for us: protection in case of job loss due to an economic crisis. With the buffer, one could still cover the installments. If the capital in stocks is completely gone, then it just won't work anymore. In addition, part of the ETFs is also intended as retirement provision. There are no other additional pensions or similar.