Is the construction loan higher than the purchase costs due to possible repairs?

  • Erstellt am 2020-05-26 22:53:28

Altai

2020-05-29 08:55:39
  • #1
There are also several banks (ING for example) that offer loans specifically for homeowners, especially for modernization and renovation. The conditions are certainly not quite as favorable as for the construction financing itself, but still better than a regular installment loan for general use, which would then be taken out for this purpose. Advantages: You are flexible, can borrow money when you really need it, and with the manageable amount, the slightly higher interest rates hardly matter. That probably amounts to about €10 per month, so that really can't be the issue. Often, however, you have to have lived in the new house for a year – but that would suit you as well.
 

nordanney

2020-05-29 10:00:57
  • #2

I have to slow you down a bit. These construction loans/renovation loans have drawbacks.
1. A multiple of the normal construction financing interest rate (ING, for example, €5-10k at 3.59%)
2. Very short term, ING, for example, 24-96 months
==> So if the OP wants to borrow €30k, they have to spend at least €400 per month. That’s quite a figure.

Conclusion: If renovations are already being planned, then please include them from the start. That saves a lot of interest and significantly preserves liquidity. Such a construction loan should only be a last resort.
 

Altai

2020-05-29 10:17:13
  • #3

You are absolutely right on both points, of course. Indeed, the short term drives the rate up: for 30k€ currently 356.54€. Only apparently he doesn’t even know yet whether or not... that’s why I wanted to mention this flexible alternative.

Absolutely true. I took out a similar amount additionally (also for things I initially thought I’d do later...)... integrated it into the main loan, today I would actually pay significantly less than half for it... but with this extra amount I am also done much faster.

Maybe also an option for the OP if he wants to stay flexible: a prefunded building savings contract. Interest rates there are significantly lower than the residential loan mentioned above. The catch here: you first save up and meanwhile pay interest on the whole loan amount.
 

Zuum736

2020-06-02 20:54:36
  • #4
Hi and thank you very much for your answers!

So I clearly understand: You can get more money from the bank than needed for the purchase, but only if you clearly know that you want to modernize and spend the money on that.

30k more as a "buffer" in case something comes up and invest the money yourself in the meantime but maybe never put it into the house (instead keep it in the savings account or buy a new caravan with it), the banks don’t agree to that. The money must be demonstrably used for the house (because the banks also want to sell their consumer loans).

Ok. Then that’s clear so far, thank you!
 

nordanney

2020-06-02 21:11:39
  • #5
Of course the banks go along with it. It's simply called "using less equity" and in return maybe accepting a worse condition that you carry with you for at least 10 years.
 

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