Financing | Single-family house | Feasibility | 2nd rank

Hello everyone,

We have been searching for a single-family home for over 7 years and have finally found one. We consulted with several financiers beforehand to see if our project would be feasible and have now commissioned one to obtain loan offers. Unfortunately, due to current circumstances (Corona), the processing and issuance are somewhat delayed.

Problem:
After a phone call, my financier warned me that more equity or the repayment of a private loan might be necessary. Therefore, I would like to present some key data to ask for your creative ideas and suggestions to stabilize our situation.

Key data:
-Purchase price: €360,000
-Incidental costs: €30,600 (no broker)
-Renovation measures: approx. €70,000
-Total costs: €460,000

Income:
-Salary 1 (permanent): €3200-3800 net
-Salary 2 (permanent): €1800 net
-Child benefit (2 kids): €400
-Net cold rent from condominium: €616

Outstanding loans:
-Private loan (consolidated for cars, student loans, etc.): currently €33,000 / €550 installment
-Condominium remaining loan: €130,000 / €600 installment

We planned to contribute as little equity as possible (€0-20,000) because we want to keep reserves in case something unexpected happens during the renovation. As compensation for the low equity share, we wanted to include our condominium (valued by financier at €250-300k) as collateral in the loan construct.

After today’s call, I am a bit unsettled and naturally doubt the feasibility of our project. I have repeatedly mentioned that I want to contribute little equity but would like to include the condominium instead.

How do you assess our situation, and do you perhaps have creative ideas on how and whether we should change something about the construct?

Best regards and many thanks, I look forward to your answers.

Sell the apartment or leave it out completely. In second rank, this supposed additional security brings you nothing.

You will have to pay the ancillary purchase costs in cash at a minimum. Depending on the bank, more, if the modernization costs are not comprehensible or not fully accounted for 100%.

From the bank's perspective, I can understand it. So also sell [ETW], repay the installment loan and off you go

That is a total of 623k€ in liabilities for now. How much has already been paid off on the condominium? What confuses me is the salary range of 600€ in the man's monthly salary. Assuming the 3200€, you have 200k€ more debt than we do and 400€ less income, and then you try to convince me not to contribute any equity.

I find it all quite bold without equity.

How much equity do you have? How much equity is spent on the ancillary purchase costs and how much goes additionally into financing the rest? I can understand the bank too. Or in other words, I don’t quite understand why after 7 years of house hunting you still carry a debt burden of €33,000. Are the "Privatdarlehen" really from private persons? Addendum: What does the bank say, where you already have the condominium?

Thank you for your feedback. In my online research, I received similar assessments. However, all financiers I spoke with claim the opposite. This is currently very unsettling for me.

The modernization measures have been discussed with an architect and will be signed by him if necessary.

If I pay the purchase incidental costs in cash, I would then remove the apartment from the structure and, if necessary, refinance it again later if I need more.

Without time pressure, that would be the best idea.

The husband’s salary is 3200 net fixed and, depending on effort, open upwards. It was financed back then with 160k and 130k remain.

We currently have about 30k in equity - which I did not want to use because I am expecting unplanned costs. The debt mountain resulted from a restructuring of all loans (cars, student loan, etc.) and was "only" paid off with 546€, because we wanted to pay off much of the condominium. (The rate was very high until recently -> I have now reduced it to make my balance sheet more positive)