Planning our home financing

Ok, so that means you would prefer to pay the variable interest on the additionally borrowed money?

With the installment as well, if he repays more, he has more value in the property and always pays less variable interest, you would also want to waive that?

thanks! I will calculate it again once I know the exact interest rates. But the costs might be manageable for just one year of interim financing.

What would you say about the overall project in total? Should we rather postpone the start of construction by a few months to save more money, or is the basis already sufficient?

I can tell you for orientation how we did it.

Since we did not agree on the total costs or could not quickly estimate the entire cost framework (land, house, ancillary building costs including outdoor facilities), we financed the land variably. We invested all our equity in the land because the land is recognized as equity. The advantages were lower interest rates, the option of special repayments in any amount, and independence from the bank financing the land.

We set aside €3,000 every month so that after just under a year we paid off the land with the special repayment. In the meantime, we planned the house with our architect and obtained an offer. The bank financing the house then accepted the land as equity without any problems.

If that would be your model, go for it. We found it very flexible and pleasant not to have pressure because of the low rate of €160 but still to be done quickly thanks to the special repayment.

I've just skimmed everything, but I wouldn't put all the equity into the property.

There will still be some costs coming up that you can't cover with the loan. Kitchen, new furniture, lamps, general furnishings and decorations... all things that "just come with it" and often end up in the category "every little bit counts." Roughly estimated, we should be touching around €20,000 by now (including a mid-priced kitchen). Those are amounts you can't just save on the side alongside the construction site. But I would kick myself now if I had a finished house that remains bare and uninviting because there's no money for that.

Oh yes, if you haven't factored in the garden yet: the same amount tends to go there too. Unfortunately. :-(

Sorry, I then indicate these non-value-increasing items in the cost plan and they are accordingly not considered value-increasing; correspondingly, the bank can and will also pay for or provide this amount.

These items are only not financed afterwards if they reduce the loan-to-value ratio at the time of applying for the loan and it then turns out that non-value-increasing trade items are to be paid from it.

In other words, if I provide equity for these items, the loan-to-value ratio does not change either, since the equity does not appear at all. However, if I have integrated a kitchen in the cost plan and indicate this 10,000 euros as equity, then the bank also pays for the kitchen. This ratio is the same as if I do not mention the kitchen but indicate 10,000 euros less equity.

But that is not the core issue here; it is merely about technical processing and interest savings. One does not even have to want this, but an argument that the money would then be gone or that one can no longer buy these items is not one, because otherwise one misleads the consumer who wants these savings during the 1 1/2 years.

Besides, there are further funds available here, as they continue to be saved.

From my point of view, it may make economic sense to use as much equity as possible at the beginning, precisely to save variable interest payments and above all to increase the choice of banks. Even with variable interest rates, the offered interest rate can be measured according to the loan-to-value ratio; accordingly, there can also be further interest savings here beyond the more favorable interest rate to be generated.

No one said to use everything, HelpHelp did not say that either, but unfortunately, the arguments for using less are not valid, as the supposed problems raised do not arise and can be discussed with the bank, especially since the arguments in favor of a high use are simply too convincing, both from an economic point of view and from the perspective of the choice of banks (in relation to the payout criteria) that finance the properties.

If someone wanted to save these interest costs and increase their choice of banks, the perspective might not arise for them if they took the non-applicable arguments from HelpHelp as the basis for their decision, and therefore I would like to clarify or correct this.

I just skimmed through everything, but I wouldn’t put all the equity into the property.

There are still some costs coming up that you can’t cover with the loan. Kitchen, new furniture, lamps, general furnishings and decorations... all things that “just belong” and often end up in the category “every little bit counts.” Roughly estimated, we’re probably looking at around €20,000 by now (including a mid-range kitchen). These are amounts that you can’t just save on the side alongside the construction site. But I would kick myself if I ended up with a finished house that remains bare and unlivable because there’s no money left for that.

Oh, and in case you haven’t factored in the garden yet: the same amount easily goes there as well. Unfortunately. :-(

As described, this money can only be missing if I don’t consider it in my cost calculation, but not if I invest existing equity in the initial purchase of the property. In this respect, it’s a different problem than what might be expected here or what was addressed and asked about.

It’s not that you have to keep equity back, no problem, but you don’t have to, because you invested it upfront in the land purchase, gained advantages, and therefore it’s not missing at the end.