raffa
2017-07-03 11:50:22
- #1
Following situation:
we have built and want to sell and build again (we have the land commitment), because we do not feel comfortable due to various factors. I have already disclosed the reasons for this in another thread. Therefore, please no discussion on this.
Since the topic sale and new construction has not yet been sufficiently discussed, I would like to open a separate thread on this:
We have now been to the bank and discussed the matter. They were very open to our plans, which honestly surprised us. We thought they would rather dismiss us. But the opposite... they worked out an immediate solution with us and even cautiously encouraged us to do it. In the end, we left the conversation with a great feeling, but still uncertain, as the bank of course does not do this purely out of goodwill.
It could proceed as follows:
The bank gives us a second loan, say for example €500,000. Interest either variable or fixed for e.g. 2 years. With this loan we could buy the land and build the house.
2. We would then have to sell our current house over time. The money from the sale of the house flows into the repayment of the second loan, with which we built the new house.
3. We keep our current loan from the current house. This is only transferred to the new house after the house is sold. Advantage: conditions remain the same, repayments made remain, no prepayment penalty. - I don’t see any disadvantage here, do you?
4. During the construction phase we would have to service the existing loan + the interest on the new loan. We could do this easily, since both full earners.
5. The bank would even, if things get tight, allow the current loan to be repayment-free for up to 2 years. Meaning, we would only pay interest. Of course, the term would be extended.
6. For a while we would have mortgages of over 1 million until the house is sold *phew* :)
Now to the risks we see:
1. if we realize less from the sale of the house than planned, we would have to take on the difference in the form of additional debt. Example: house brings in less than 500k for the new build, say only 470k, then we would have to take on and repay an additional 30k. Probability 50/50?
2. If we do not get the house sold, we would have to rent it out and cover the difference between missing rent and payable loan. Probability 30%?
3. Interest rate risk: with a variable interest rate for the new loan, we would be exposed to possible interest rate fluctuations during the construction phase – but since we are "only" paying interest, this should be manageable.
4. Bypass road at 20-30m distance a sales risk? Location itself is great (close to universities, universities of applied sciences, supermarkets, doctors, many jobs, large cities, nature) and the desired price comparable to existing properties. Older houses from the 70s go for similar prices or more plus need for renovation. Still, we cannot estimate to what extent the road is a hindrance here. We consider ourselves very sensitive to noise. Visitors and relatives have not heard the road so far. What speaks for our house is the equipment and architecture praised multiple times from many sides (architects, construction supervisors, craftsmen, friends).
What have we overlooked? What risk do you see? Is this a good deal? For us it sounds like a fair deal, where the bank of course also profits, but ultimately lets us come out of it fairly well... e.g. no prepayment penalty.
Or, what do you think?!
we have built and want to sell and build again (we have the land commitment), because we do not feel comfortable due to various factors. I have already disclosed the reasons for this in another thread. Therefore, please no discussion on this.
Since the topic sale and new construction has not yet been sufficiently discussed, I would like to open a separate thread on this:
We have now been to the bank and discussed the matter. They were very open to our plans, which honestly surprised us. We thought they would rather dismiss us. But the opposite... they worked out an immediate solution with us and even cautiously encouraged us to do it. In the end, we left the conversation with a great feeling, but still uncertain, as the bank of course does not do this purely out of goodwill.
It could proceed as follows:
The bank gives us a second loan, say for example €500,000. Interest either variable or fixed for e.g. 2 years. With this loan we could buy the land and build the house.
2. We would then have to sell our current house over time. The money from the sale of the house flows into the repayment of the second loan, with which we built the new house.
3. We keep our current loan from the current house. This is only transferred to the new house after the house is sold. Advantage: conditions remain the same, repayments made remain, no prepayment penalty. - I don’t see any disadvantage here, do you?
4. During the construction phase we would have to service the existing loan + the interest on the new loan. We could do this easily, since both full earners.
5. The bank would even, if things get tight, allow the current loan to be repayment-free for up to 2 years. Meaning, we would only pay interest. Of course, the term would be extended.
6. For a while we would have mortgages of over 1 million until the house is sold *phew* :)
Now to the risks we see:
1. if we realize less from the sale of the house than planned, we would have to take on the difference in the form of additional debt. Example: house brings in less than 500k for the new build, say only 470k, then we would have to take on and repay an additional 30k. Probability 50/50?
2. If we do not get the house sold, we would have to rent it out and cover the difference between missing rent and payable loan. Probability 30%?
3. Interest rate risk: with a variable interest rate for the new loan, we would be exposed to possible interest rate fluctuations during the construction phase – but since we are "only" paying interest, this should be manageable.
4. Bypass road at 20-30m distance a sales risk? Location itself is great (close to universities, universities of applied sciences, supermarkets, doctors, many jobs, large cities, nature) and the desired price comparable to existing properties. Older houses from the 70s go for similar prices or more plus need for renovation. Still, we cannot estimate to what extent the road is a hindrance here. We consider ourselves very sensitive to noise. Visitors and relatives have not heard the road so far. What speaks for our house is the equipment and architecture praised multiple times from many sides (architects, construction supervisors, craftsmen, friends).
What have we overlooked? What risk do you see? Is this a good deal? For us it sounds like a fair deal, where the bank of course also profits, but ultimately lets us come out of it fairly well... e.g. no prepayment penalty.
Or, what do you think?!