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You don’t necessarily have to do any calculations. I am mainly interested in the principle:
The actual situation is even a bit more complex than I described here, especially regarding the inheritance situation, but I will try to phrase my questions as concisely as possible.
1.
At your bank, are dividend/investment income fully taken into account with regard to the current monthly income (i.e. annual yield/12)? Is the value of the past year simply taken or an average of the last few years?
2.
What about unrealized price increases of securities (e.g. accumulating bond funds that do not generate ongoing income), but also just normal stock price increases with regard to accounting for the current income?
3.
Are payments not notarized within the scope of an inheritance settlement included in the current income?
4.
What amount is set as the minimum needed for living expenses aside from the loan?
5.
It is still clear to me:
If I tell the bank clearly that I want to sell the property again in 10 years, can I then not pledge valuables such as life insurance policies that are intended to be counted as monthly ongoing income? So for example: I pledge €12,000 cash; this would then represent monthly ongoing income of €100. (12*10*100 = 12,000)
Or is this not possible due to any provisions on immorality (which then work to the customer’s disadvantage!) and the €12,000 would be spread over the ENTIRE loan term until final repayment, e.g. 40 years? Would those €12,000 then be counted as €25 monthly income? Or is such a cash pledge counted as €0 and thus pointless?
6.
What about if I make a kind of (interest-free) private loan with an acquaintance?
So let’s say I give him €12,000. And he pays me back €100 for 10 years. Would those €100 then be fully counted as ongoing income?
Or is this not the case because the term is only 10 years but the loan - let’s say - runs for 40 years until final repayment?
Extremely: Wouldn’t it be enough if someone paid me the last 3 months €100 each on the same day or does the bank then want to see the corresponding loan agreement?
7.
Let’s assume I just manage to achieve this 6% annuity. What kind of interest rate fixed for 10 years with approximately 2% initial repayment would then be expected?
Property 1: value €450K; loan €150K
Property 2: value €380K; loan €150K; current loan amount: €275K
Now new
Property 3: value €280K; required loan €270K.
Securities can still be extended to the first two properties; optionally a life insurance etc. could also be pledged.
Or if you don’t want to calculate: How many basis points more do I roughly pay compared to someone in the same situation but with a monthly net income of €10,000?
Ah ok, so the legal requirement is to verify whether the repayment of the loan is secured from income. And your bank-internal implementation of this general regulation is now to verify that a 6% annuity can be serviced.
Did I understand that correctly?
Yes, every bank already has its own guidelines, but I do believe that there is something like a general standard from which individual banks sometimes deviate somewhat (for example, your bank also works with the 80% accounting of rental income, which I was already familiar with in advance).
I am very interested in the SPVs:
How do they even come up with a 6% annuity?
Ok, if they bring 50% equity that’s clear. But many operate with at least 90% debt.
For that, they would need at least a gross rent of 8%, so that after operating costs (which also include administrative costs for accounting etc. compared to private investors) 6% would remain for the annuity. But where can you still get 8% nowadays??? That’s even difficult commercially in a small village on a field (and there, rental default is higher than what you could calculate with only 20% operating costs).
Sure, if they started small 10 years ago when rental yields were higher and the property price has doubled since then, they only need about 4% rental yield based on the current market price to reach this 6% annuity.
But I don’t understand how a NEW SPV set up NOW has a chance to get a loan? It would need at least 30% equity in the financing and even that is very tight. And if you bring more than 30% equity, the equity return is no longer really interesting. (You also need equity reserves for operating costs, fund administration etc.)
You’ll laugh: I had considered setting something like that up myself once; there are many interested investors; what is the minimum volume of such an SPV at your place? I was once told €10-20 million would be the minimum. According to my calculations, it can already be operated economically from about €3-5 million. You can, for example, do the accounting yourself.
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If you can’t/won’t share bank internals, at least post something constructive here!
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Yes, I just want to find out how this lending practice looks. What is prescribed by law, what is set internally by banks. Regardless of my specific situation, I am simply interested in the general principle. Exactly, this directive or this law probably contains the framework conditions. Do you know it or can you briefly summarize it?