One large loan or one larger and several smaller ones?

Hello everyone,

we are going to build a house (contract with the GU has been signed) and are about to have discussions with the banks. Previously, we have already inquired about the "feasibility" with two financing brokers and the house bank.

I understand that most people take out a mortgage for the entire amount. But it seems there are also people who split this: costs for the house from the GU + additional construction costs in a large loan and then, for example, take out a separate loan for the garage, etc. The kitchen, for example, is then financed directly through the furniture store. etc.

Now the question arises for me whether this makes sense? Or could the bank that is registered as first priority in the land register then assess the property value lower and the conditions for the interest rate be correspondingly worse?

For me, the incentive would be to have more leeway with the repayment rates and then, for example, pay off the loan for the garage faster etc.

Yes, that's what people do who miscalculate and need additional financing. There are also models, for example DSL Bank, which accept an installment loan as a substitute instead of equity capital. It is a naive calculation since installment loans are slightly more expensive. Regarding your question, if you want to split, the banks will do it. However, you should note that there are minimum and maximum special repayments, and with multiple components with terms, problems can arise with follow-up financing. Because new banks are reluctant or impose high interest surcharges to go subordinated.

We first split: bank loan 99,000 euros, KFW home ownership program 50,000 euros, KFW renovation loan 60,000 euros. The reason was the low interest rates for the KFW renovation component (0.7%) and especially the possibility to set the KFW shares to be repayment-free (3 and 5 years). This way, we started life in our own home with a minimal installment of 470 euros.

Ultimately, however, we used the repayment-free period to make special repayments (nice to have the choice) and when it expired, there was no reason to keep the split. It was rather annoying since there was no information about the account balance during the year and the statements had to be paid for three times (45 euros at least).

Accordingly, after 5 years we arranged a follow-up financing with only one loan for everything, thus also waiving the subsidy (we could have had the 0.7% for the 60k component for another 5 years). But that was bearable since the interest rate for the follow-up loan was then available at 1.4% instead of previously 2.5%. And now we can see the account balance online at any time.

Conclusion: Splitting yes, if it really makes sense (and only for as long as it does)

But there also seem to be people who split here: house costs from the general contractor + construction additional costs in one large loan and then, for example, take an extra loan for the garage, etc. The kitchen, for example, then financed directly through the furniture store. etc.

You can also do that at a bank. For example, a larger part long-term and a smaller part to be repaid faster and with higher installments. Just get advice according to your wishes. However, if there is no equity and you therefore need so many loans, it’s a bad idea anyway—no matter whether one or several banks are involved.

ok thanks for the message! I am currently preparing the bank appointments. One more question: Can (and will) the bank include additional funding in the financing concept? For example, regional subsidies etc. Or does the builder really have to actively contribute everything themselves beforehand?

If the start of construction is foreseeable – and thus also the first payments and draws – a separation of a part (e.g., 100 TEUR) makes sense if the interest-free period is shortened to 6 months and this is accompanied by an interest reduction for this part. The remainder can then be agreed to be interest-free, for example, for 12 months.