The bank advises not to take more than 50% of the net salary as a monthly construction installment.

Hello,

I am new here in the forum. And here is my situation:

I want to add a storey to a house in Wiesbaden. The extension costs about 400,000 EUR. No one can give me exact prices yet because no construction company has been found so far willing to build the property. However, both the architect and an acquaintance with a turnkey construction company quoted me a price of 370,000 - 400,000. It is often said that the costs are usually 5-10% above the originally planned costs.

Thanks to the low interest rates, it is possible to get a construction loan at around 0.7-1.2%. A first conversation with a bank employee ended with the banks not allowing/accepting a monthly rate of more than 50% of the net salary.

The financial situation is as follows: 36 years old, single, no children, fixed net salary 3000 EUR permanent employment + possibly additional income from self-employment of about 500 EUR (the bank would not consider this as it is not guaranteed). Own capital amounts to 140,000 EUR.

I would like to repay the loan of 260,000 EUR in a maximum of 15 years. My idea of the monthly rate is 1700-1800 EUR, which the banks consider far too high. Regarding living expenses: There are no loans. I do not take vacations. Even if I calculate 300 EUR for ancillary costs, I would have 900-1000 EUR left per month to live on. In my opinion, more than enough. Moreover, the self-employment income is not included. That would be about 1400-1500 EUR left to live on.

Everyone advises me against it. The problem is that everyone has a different opinion. Some also say that you should not set a fixed rate at all, but look at the end of the year what money is left over and then repay this as an annual rate flexibly.

The very low interest rate results from the high equity. Which brings me to the next question. Allegedly, subsidies for construction do not apply because they are calculated with higher interest rates, so higher than the bank’s interest rate. Another question is: how is the equity viewed? Does it serve the bank as security in the form of: it must remain untouched so that in the event of unemployment/income reduction a buffer is there? Or do they say: 400,000 EUR construction costs - 140,000 = 260,000 loan? That would mean that the first 140,000 EUR of costs that occur I simply pay from my account, and then starting from 140,001 EUR the loan applies?

Many thanks in advance

- It is suspicious if no one wants to build that!

- The percentage of the net income used mainly depends on how many euros (absolute euros) are left over. 3000 net is not really much (in connection with a 400,000-euro project). Accept the bank's rate and have them grant you corresponding special repayment options.

- Yes, first the equity is used, then the bank disburses funds. So always project costs minus own money equals external capital requirement. It should be considered that there are a number of costs that are not included in the project from the bank's perspective and also money must be available for unexpected expenses. In the example, therefore rather 140,000 euros assets, minus 40,000 euros as a buffer and for miscellaneous, equals 100,000 equity. External capital requirement 300,000 euros. At an annuity of 5 percent, that makes 1250 euros monthly payment.

Reduce the monthly installment and pay the rest through special repayments. This also fits with the fluctuating income from self-employment. However, you won’t get full repayment conditions this way; you’ll have to accept the downside. For me, the question of why no one wants to build this is important, but at least equally important to clarify. The costs are also hefty. For this, 90% of new houses built here are completely new. Demolition and new construction is not an option?

The problem is the workload of the construction companies. At the moment, so many are building because of the low interest rates. I sent the construction plans + statics to about 20 construction companies from the nearby area and asked for a quote. Only 3 companies responded. 2 said they had no time and the third company would only create a quote if I gave them a construction contract. But who does that, please? I was told that the effort of making a quote would be too great because they cannot be sure of receiving the contract. But this risk exists in every trade.

What I found, however, were companies that would do individual parts of the work. So bricklaying work, then another company for windows, one for the roof, one for the floors and stairs, etc. But in this case, the risk is just too great that things will not go hand in hand and that there will be major construction delays. Especially since there is an existing house, the ground floor, which is fully inhabited and should suffer as little damage as possible during the work.

What I would prefer is a company that does everything completely. This one will also be able to make better scheduling plans, etc.

The construction costs come from the fact that we are talking about around 925m3 of enclosed space (new construction, not existing building), the upper floor has 145m2 and the roof is also completely expanded. In addition, the entire facade on the ground floor is insulated, new entrance area + new windows on the ground floor. The upper floor has floor-to-ceiling windows, many glass sliding doors, and around 180 degrees of stainless steel balconies around the house. The roof is partly with steel frame construction to omit additional supports, etc. This all costs much more than 0815.

Initially, there was also the plan to work with insulating smart glass, and the house corners, panes set flush against each other. But then a suspended ceiling would have to have been used, which would have meant additional costs of about 120,000 EUR in total. Which would have been decisively too expensive for me.

Topic demolition/new construction is not an issue. The ground floor is inhabited by the family. The house is from 1980, received a new heating system only in 2010, bathrooms were renovated in 2013, as well as the kitchen and all the floors.

if I calculate 300 EUR for additional costs,

for how many square meters?

I want to add an extension to a house in Wiesbaden. The extension costs about 400,000 EUR.

Would you then be the owner of a condominium in a two-family house with the extension, or partially half-owner of the land and the house as well? I ask because I find 400,000 for an extension quite steep – however, I’m not familiar with these prices or with construction costs in Wiesbaden...

And yes, regarding your question: I know it this way, that banks on the one hand take certain rates for living expenses etc., and not the intended costs of the borrower. And since this year, banks are apparently also required to increasingly look at the financial security of living expenses.