Youluara
2021-06-10 22:24:39
- #1
Hello everyone,
I have a question and hope that I can formulate it clearly.
We want to buy a house.
Purchase price: 350,000 euros
Additional costs: 35,000 euros
Modernization costs: 150,000 euros
Available equity: 235,000 euros
So we would have total costs amounting to 535,000 euros. We could contribute 235,000 euros in equity and would need a loan of 300,000 euros. Usually, the modernization costs are included in the construction financing loan, at least if they increase the value. For this, however, we would have to present a cost estimate, submit receipts, etc. (Option 1)
So far, so good. However, one bank proposed that we finance only the property purchase through the construction financing loan (with little equity) and cover the modernization measures exclusively through equity. Advantage: We would not need to submit cost estimates, invoices, etc. since we pay out of pocket.
That means:
House purchase + additional costs: 385,000 euros
Equity: 85,000 euros
Loan required: 300,000 euros
We would finance the modernization measures (independent of the loan) through our remaining equity (150,000 euros). (Option 2)
I had assumed that the interest rates in Option 2 would have to be significantly higher because we are not putting a large part of our equity into the loan but keeping it “freely available.” However, the interest rates are even better than those of Option 1 (from another bank). If this is really the case, in my opinion Option 2 would be better because it is less stressful without cost estimates, invoices, receipts, etc. Or is there some catch to this?
Many thanks in advance for your answers!
I have a question and hope that I can formulate it clearly.
We want to buy a house.
Purchase price: 350,000 euros
Additional costs: 35,000 euros
Modernization costs: 150,000 euros
Available equity: 235,000 euros
So we would have total costs amounting to 535,000 euros. We could contribute 235,000 euros in equity and would need a loan of 300,000 euros. Usually, the modernization costs are included in the construction financing loan, at least if they increase the value. For this, however, we would have to present a cost estimate, submit receipts, etc. (Option 1)
So far, so good. However, one bank proposed that we finance only the property purchase through the construction financing loan (with little equity) and cover the modernization measures exclusively through equity. Advantage: We would not need to submit cost estimates, invoices, etc. since we pay out of pocket.
That means:
House purchase + additional costs: 385,000 euros
Equity: 85,000 euros
Loan required: 300,000 euros
We would finance the modernization measures (independent of the loan) through our remaining equity (150,000 euros). (Option 2)
I had assumed that the interest rates in Option 2 would have to be significantly higher because we are not putting a large part of our equity into the loan but keeping it “freely available.” However, the interest rates are even better than those of Option 1 (from another bank). If this is really the case, in my opinion Option 2 would be better because it is less stressful without cost estimates, invoices, receipts, etc. Or is there some catch to this?
Many thanks in advance for your answers!