Questions before the bank interview

I still have a few questions before the meeting with the bank.

I want to go there with a bank folder in which I show the costs, the equity, and our monthly balance sheet. Additionally, we will receive some information from the prefabricated house manufacturer regarding energy efficiency, area calculations, etc.

I am still unclear about
a) own work
b) (non-)financable costs

a) How to specify own work?
Except for the floor and wall tiles in the bathrooms, we want to do all walls, floors, and ceilings (to Q2 by the house construction company) ourselves. Likewise, after the house is set up, we want to take care of the exterior areas ourselves.

I now wanted to include the own work as equity. The prefabricated house provider optionally gave me the prices he would estimate for these positions (you can also build turnkey with him) and separated into material and labor.

Material is clear, I need that regardless of whether I do it myself or have it done.

I wanted to simply include the provider’s labor costs for these items as equity.

Equity labor
Walls / ceilings = + 6,124 €
Floors = + 4,456 €
Exterior areas & parking spaces = + 3,000 €

But do I then also have to add the same amounts to the costs so that from a cost perspective it is a zero-sum game, and only the equity portion increases in relation to the total volume?

Even if they do not occur as "real costs" but rather as an "increase in value" of the house!?

It sounds somehow strange but the other way around seems even more illogical to me.
Not to include it as a cost but still deduct it from equity.

b) What cannot be financed?
Property transfer tax, notary fees, land charge registration, and furniture/kitchen are clear to me. This must be covered by additional equity and does not interest the bank at all. However, things like soil survey, surveying services, construction water & electricity, and screed drying can be included as costs in the financing.

But how does it look with things like...
- interest during the construction phase
- contributions to the construction trade association (for own work)
- insurance for the construction phase
- road closures
- lamps (treated like furniture?)
- network equipment (fixed installations like cables in the wall & sockets)
- network equipment (patch panel, cabinet, rack switch)
...?

This is also not necessarily all directly beneficial to the "value increase" of the property!?

Thanks for your assessment.

Hello HB,

regarding a)

if you want to calculate in own contributions, then you have to, as you yourself already say, list these both as costs and as equity. The said zero-sum game. You also have to consider the material on the cost side, because that, as you yourself recognize, is not for free.

If the three mentioned items are purely labor services, then we are talking about 270-450 working hours. Let's say the middle is 360 hours. These are hours by specialists. So if you are not a painter, plasterer, tile layer, carpet layer, gardener, road and landscape gardener, you can easily double this time at least. So we are talking about 720 hours here. This corresponds to 45 weekends (2 days x 8h) or 90 consecutive days for one person. That is quite a big figure for an IT consultant. Here I assume that the leisure time is rather less than more.

Please do not overestimate yourselves, because in the end that annoys you the most.

regarding b)

There is basically nothing that is not financeable for a bank. The question is always: at what interest rate and with what security.

The things you mentioned as questionable can, in my opinion, generally be co-financed, but! if it fails over something like lamps or a 19" rack for 200 euros, then you should perhaps reconsider the whole project.

Basically: the more equity, the better. And it cannot be that you want to talk here about an estimated 1,000 or 2,000 euros. See that as a personal hobby/furniture wish, especially regarding the little network technology and lamps.

We just had our bank meeting last week and they explained to us that they generally recognize about 10% own contribution flat rate; if you want more, you have to explain it precisely: trade profession, craftsmen in the family, etc...

Regarding b: Basically, everything is financeable. It mainly depends on your income. We have a fairly high income and were offered 100% financing at very low interest rates, and ancillary costs and kitchen, etc., through a subordinated loan as well so that we did not have to liquidate our fund for equity capital. Ultimately, however, we decided to cover all ancillary costs, kitchen, etc., through equity capital and only finance the pure purchase price. But this is purely a matter of cost and must be calculated individually.

Thank you for confirming the inclusion of own work in the costs.

As for the execution, it’s probably true that we haven’t reflected the "value" in hours yet. But we are basically optimistic that we can manage it. I’m not exactly a handyman, but I can handle painting. For the other tasks, I will help accordingly. We want to do most of it as a team of three, with my father-in-law just retiring, ready to help with the interior work of the house. He and my sister-in-law have already renovated several rooms together and, for example, completed an entire bathroom on their own within 2 weeks (but our house construction company handles our bathroom). I will certainly have a week or two of vacation; no trip is planned that year anyway. I also generally have some overtime hours, and thanks to home office, I am generally flexible.

The (quite usual) plan is to move in about 3 months after the house is set. During this time, the interior work by the prefabricated house company will take place, and as soon as the screed is dry, we can get started. We want to install the network and SAT cables during the first 2 days of the house setting when the ceilings and walls are still open. The electricians will also do their work within those 2 days.

So we have about 2 months to make the house livable. Not every room has to be finished by the move-in, even though it would, of course, be desirable considering the dirt. The second children’s room is not needed yet; if necessary, it’s fine to do without both children’s rooms at first. Also, the office is not that critical because I can otherwise simply use the neighbors’ (in-laws’) internet access with my laptop.

Excluding the exterior works, at your average estimate, that’s still only 280 hours, i.e., 17 weekends (2 days of 8 hours each). As a team of three, that’s only 6 weekends left. It’s still a lot of stress to power through 6 weekends, but as I said, not everything has to be finished by move-in. Oh, and any work during the week (retiree, my vacation) takes workload off the weekend.

And even if the move-in is delayed, we have a free place next door and a cellar for interim storage.

So yes – it will be stressful, but since it’s not decisive and we have a Plan B, I see no reason to plan it differently or outsource it.

Thanks also for the assessment that your bank accepted 10% as own work. I am not sure which value the 10% refers to (total costs, financeable production costs, loan amount), but even as a percentage of the loan amount, it’s less than 10% own work for us.

Regarding b)
Thanks also for the assessment here. I have a fairly detailed calculation but only wanted to take the summary to the bank. I just didn’t want to "hide" costs there that cannot be financed. Since apparently every bank handles this a bit differently here (except for notary/property tax), I will simply play with open cards and wait to see whether the bank wants to include it in the financing amount or not. It’s not about us not being able to “afford” these amounts from equity either. But the individual amounts can add up, and then depending on the model, you might have €5,000 more or less equity in the financing (not withheld). This can possibly also affect the interest rate over the entire term. We are at around a 20% equity ratio, 19-21% depending on how much equity I withhold for these “non-financeable items.” With some online calculators, you can already jump into another interest class if you go over 20%.

Every bank advisor who feels good about a financing will also turn an 81% financing into a 79.9% financing. That should not be your concern, especially since you do not know the bank's loan-to-value ratio at 100% anyway.

Good to know.

Our first bank appointment is now on 23.03.
Let's see :-)