Wormser1989
2020-06-03 10:47:29
- #1
First of all: Hello everyone! My wife and I are currently planning a new construction project, and in the course of this, I came across this forum. Since a forum naturally thrives on exchange, I didn't want to start directly with questions but rather possibly contribute my input here. I am a bank clerk – more precisely in loan approval/decision-making. Therefore, I think I can answer the original question of the thread creator, at least from my perspective (or rather that of my employer). One must of course always consider that each credit institution applies different parameters during the assessment.
The fact is: There is no "common formula for maximum financing." Neither at our bank nor at many other (large) banks. The first premise is always: Can the customer meet their planned loan obligations (long-term)? Also, after the fixed interest period ends, taking into account a possibly (from the customer’s perspective) less favorable interest rate environment.
This naturally depends on various but essential factors:
1. Income
2. Expenses (especially further loan obligations)
3. Account management / lifestyle
4. Previous rent paid personally
5. Savings performance
Furthermore: The approach to child benefits ([204 EUR p.M.]) is generally a zero-sum game. Banks that take child benefits into account often calculate with higher flat rates for children; banks that disregard child benefits in turn apply lower household allowances. Either way, a child benefit calculation with about [200 EUR p.M.] should not be a factor for financing beyond the [400 TEUR] threshold.
The topic of "muscle mortgage" or self-contribution is viewed very conservatively in our institution – it must be clearly documented who really provides what in terms of self-contribution. Especially with "tight" financing, one always has to plan a potential refinancing buffer. If the capital service is already tight and the self-contribution appears high, that could of course be a sticking point. One must also always be honest with oneself. Am I willing to work several hours every free day on my own construction site? What do I do professionally, and what skills and knowledge do I bring? Are the savings from the planned self-contributions actually realistic?
I do not agree with statements like "Financing [440k] with [3.5k net/month] doesn’t add up." This depends, among other things, on the chosen repayment rate (and consequently the chosen annuity), the fixed interest period, or the financing variant (also considering the residual debt at the end of the fixed interest period – reference interest rate risk) and, on the other hand, on the spending situation. Simplified and exemplary, one could assume a repayment rate of 2% at an interest rate of 1%. This results in a monthly installment of roughly [1,100.00 EUR] per month. This does not seem excessively oversized in view of the income. However, one must keep an eye on the residual debt at the end of the fixed interest period. If there are further commitments (private loans, etc.), of course, it becomes tight.
Another important factor could possibly be the previous personal rent. The closer it is to the future rate, the more plausible it is that the rate is sustainably affordable. I always become suspicious when clients have previously paid a cold rent of around [500 EUR] and now want to trust themselves with a rate three times as high. With corresponding savings performance, though, that may be plausible again.
What is entirely disregarded here is the risk (blank exposure) of the bank. This is, of course, also hard to say and depends crucially on the evaluation.
In short: Just get in touch with the desired bank because there are so many different variables, factors, and influences here that it is hardly possible to make a reliable and serious statement in general.
Best regards
The fact is: There is no "common formula for maximum financing." Neither at our bank nor at many other (large) banks. The first premise is always: Can the customer meet their planned loan obligations (long-term)? Also, after the fixed interest period ends, taking into account a possibly (from the customer’s perspective) less favorable interest rate environment.
This naturally depends on various but essential factors:
1. Income
2. Expenses (especially further loan obligations)
3. Account management / lifestyle
4. Previous rent paid personally
5. Savings performance
Furthermore: The approach to child benefits ([204 EUR p.M.]) is generally a zero-sum game. Banks that take child benefits into account often calculate with higher flat rates for children; banks that disregard child benefits in turn apply lower household allowances. Either way, a child benefit calculation with about [200 EUR p.M.] should not be a factor for financing beyond the [400 TEUR] threshold.
The topic of "muscle mortgage" or self-contribution is viewed very conservatively in our institution – it must be clearly documented who really provides what in terms of self-contribution. Especially with "tight" financing, one always has to plan a potential refinancing buffer. If the capital service is already tight and the self-contribution appears high, that could of course be a sticking point. One must also always be honest with oneself. Am I willing to work several hours every free day on my own construction site? What do I do professionally, and what skills and knowledge do I bring? Are the savings from the planned self-contributions actually realistic?
I do not agree with statements like "Financing [440k] with [3.5k net/month] doesn’t add up." This depends, among other things, on the chosen repayment rate (and consequently the chosen annuity), the fixed interest period, or the financing variant (also considering the residual debt at the end of the fixed interest period – reference interest rate risk) and, on the other hand, on the spending situation. Simplified and exemplary, one could assume a repayment rate of 2% at an interest rate of 1%. This results in a monthly installment of roughly [1,100.00 EUR] per month. This does not seem excessively oversized in view of the income. However, one must keep an eye on the residual debt at the end of the fixed interest period. If there are further commitments (private loans, etc.), of course, it becomes tight.
Another important factor could possibly be the previous personal rent. The closer it is to the future rate, the more plausible it is that the rate is sustainably affordable. I always become suspicious when clients have previously paid a cold rent of around [500 EUR] and now want to trust themselves with a rate three times as high. With corresponding savings performance, though, that may be plausible again.
What is entirely disregarded here is the risk (blank exposure) of the bank. This is, of course, also hard to say and depends crucially on the evaluation.
In short: Just get in touch with the desired bank because there are so many different variables, factors, and influences here that it is hardly possible to make a reliable and serious statement in general.
Best regards