Which costs are NOT financed through a construction loan?

2018-10-11 14:39:50

That is ultimately just number crunching. My experience is that items like the kitchen are indeed queried, but for the determination of the loan-to-value ratio and thus the conditions, they are excluded. If you have little or no equity, it’s no longer about fractions of a percent but major jumps in conditions or outright rejection.

2018-10-11 14:52:21

As always, it depends....

Basically, you can finance everything related to building a house. From the commitment interest to the children's furniture, but....

1. Not every bank does that. This narrows down the selection of banks you can choose from.
2. Furthermore, it worsens your loan-to-value ratio and thus the interest rates. Here we are talking about value-increasing items. That means the house, renovation up to a certain amount, and ancillary construction costs without purchase incidental costs are value-increasing, thus not harmful. All other costs such as furniture, kitchen, commitment interest, etc. (here we are figuratively turning the house upside down and shaking it) worsen or are harmful to the interest rate.

2018-10-11 15:30:00

Hello everyone,

first of all, many thanks for the very quick and numerous responses.!!

With this, I can calculate the use of our equity capital more than well.

One more question to the specialists:

The building plot will be paid off by the time of construction. The currently registered mortgage can surely be reused. If the value of the building plot has increased by more than 30%, is it then wise to register the mortgage anew (and thus higher) for the construction loan? Those are also considerable costs arising from the cancellation of the old mortgage and the registration of the new one, right? (I’m thinking of about 800 euros)

Thank you!
Best regards

2018-10-11 15:36:19

Hello everyone,

first of all, many thanks for the very quick and numerous answers.!!

With this, I can very well calculate the use of our equity.

Two more financing questions to the specialists:
a)
Is it better to put the full equity (apart from a small buffer) into the loan in order to keep the loan amount and thus interest payments low (I know interest is fortunately low at the moment anyway, but I don't want to give the bank anything for free), or would you rather not include things like the chimney in the loan and therefore make less equity available for the loan?

Or does it not matter at all?

b)
The building plot will be paid off at the time of construction. The currently registered land charge can surely be reused. If the value of the building plot has increased by more than 30%, is it then wise to have the land charge newly (and thus higher) registered for the construction loan? These are also considerable costs arising from the cancellation of the old land charge and the registration of the new one, right? (I’m thinking about roughly 800 euros)

Thank you!
Best regards

a) Use as much equity as possible but leave a buffer with which you feel comfortable.
b) You will not be able to avoid the new registration of the land charge + notary and land registry. Everything must be done new when registering the house loan. An assignment only makes sense if land charge property = sum loan house financing.

I have gone through it myself. The property was partially financed and paid off before the house financing.

2018-10-11 15:44:17

I believe some banks also have minimum payout amounts, meaning a single furniture invoice might fail because it would be too insignificant. Kitchen etc. are explicitly excluded in our case, and outdoor facilities are only partially financeable. With our financing, it is therefore important to inform the bank which part of the equity is needed for what.

Regarding the encumbrance on the property: the bank assesses and decides how much the property is worth to them and what is ultimately registered as a land charge, don’t worry, you don’t have to take care of that.

2018-10-11 15:49:32

For a 400k€ home financing, the notary, land charge, and land register fees are about 2300€ out of town. It depends on what you have deleted or assigned. So actually, land charge or just the conveyance note.

The issue with small invoices is circumvented with a blank payment of 10k€. In other words, you receive 10k€ in your account and pay your small invoices. Afterwards, you have to show these invoices and you get money again.

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Which costs are NOT financed through a construction loan?

Alex85

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Bauhamster1

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Mottenhausen

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