What counts as equity?

Dear community,

one often reads recommendations for the equity ratio (approx. 20%) and also the information that the interest rate of the financing primarily depends on how much equity one brings in. I am interested in what is considered equity in these calculations. Is it actually all the money I have in any accounts or only the amount I want to put into the house construction.

What happens, for example, with accounts where I save for my children's education or with the buffer of three net salaries that I want to keep? I do not want to touch those for the house construction, but in the event of insolvency the bank would have a source of money there. Does that affect the interest rate or not?

Thank you very much!

Regards
Mr. Stein

Only the equity that is invested in the construction/purchase/renovation project counts as equity or for determining conditions. In construction/renovation, for example, the muscle mortgage (own labor) can also be credited. However, every bank does it differently.

Is it actually all the money I have in any accounts or only the amount I want to invest in the house construction.

Only the contribution that goes into the house construction and, worse still, only the built value is taken into account. Money that you need for the kitchen or for the later creation of a flower bed is still on top. The 20% refers to an amount (100%, obviously) that can be significantly below your project budget (100% plus X; incidental costs and much more).

Everything that brings money to the bank if the house is foreclosed (assuming that you are then bankrupt).

Correct, if you also offer the money for the children as collateral, this money could also be considered equity (risk reduction for the bank). But honestly: Not standard and nobody does that.

You decide what amount of financial resources you state as equity. You can keep as much buffer and reserves as you want.

Greetings

Correct, if you also offer the money for the children as collateral, this money could also be considered equity (risk reduction for the bank). But honestly: not standard and nobody does it.

How is that supposed to work? It would then have to be taken out of your access for the duration of the financing, right? Otherwise, how is the bank supposed to prevent me from blowing it after signing?