With the own home into ruin

Well, equity is definitely relevant because it determines the interest rate. But apart from that, it really doesn’t matter how much you bring in.

In my eyes, the banks are mainly to blame. This isn’t about a TV or a car. It’s about something more. And in the interest of the customers, the banks should be much more cautious.

When I think about what was offered to us, initially sweetened with calculations, we would be in deep trouble today. The house bank offered us a loan of €350,000 on the spot without any equity. Fortunately, we are very cautious people and like to think about offers before agreeing. The installment would have been 55% of my net income. Way too high, and that over 20 years with 1% amortization. It’s an insult to even put such a thing on paper. If a customer signs something like that, he’s just out of luck. And no layperson can assess the true scope of a construction project until they’ve done it themselves.

We decided on a much smaller loan, increased our equity, and are now safe forever. We are expecting a child soon, and it was not clear to us at all what financial burdens were coming our way. Not a word from the banker at that time...

What the banks are doing is playing with the wishes and dreams of young couples. They are supported by shameless billboard advertising and dubious home providers who still talk about rent-to-own and keep the starting price as low as legally possible. Then comes the nasty surprise.

Our house was offered to us for €190,000. Meanwhile, due to many additions, customizations, and technical updates, it has risen to €225,000. The originally calculated €10,000 for earthworks couldn’t be maintained; many surprises came up, etc. Banks ought to know better that every building becomes more expensive and that ultimately more capital is required than initially applied for... keyword refinancing. And here, banks also play a vicious game. They reject with outrageous arguments. That’s what happened to us. Our monthly payment is about 30% of my net income. My wife receives parental allowance for one year and then goes back to a part-time job... and yet, they deny us refinancing for a measly €100 per month.

The arguments are, as I said, outrageous. They reject because they have no comparable values for property prices in the area... According to their calculation, our house and plot are worth €50,000 less than what we are paying. And after we repeatedly followed up, we were first given an immoral offer: full repayment within 5 years... €600 monthly payment, or no refinancing. Meanwhile, they have stopped negotiations. No willingness to talk anymore.

This doesn’t affect us too much because we still have private sources that intervene in an emergency, and we are now simply giving up on the outdoor area and garage, but I find it impolite. If we didn’t have family support to catch us, we’d have to worry about the whole project now. Because there are simply many costs (additional foundation costs and hidden development costs, and so on) that appeared that no one expected at the beginning. Not our financial advisor, not the house builder, and not the lawyer who checked our contracts.

And precisely because of these own experiences, I think it’s great that such articles are written. People need to be woken up and shown that something like this can really go wrong.

The fact that your follow-up financing was rejected clearly shows that building without sufficient reserves in hand can quickly backfire. Before you know it, you suddenly find yourself in a financial predicament that the banks shamelessly take advantage of. Therefore, I personally don’t think it’s very wise to invest all your own capital, but rather to find an appropriate concept where everything fits and, on top of that, enough capital remains in reserve. The bank also wanted to talk me into giving up all my own capital with "But you still have..." which I immediately declined thankfully. I brought 45K and not a cent more. In the end, I still had enough left to be prepared for just about all eventualities. Either the way I imagined it or not at all.

We are right in the middle of the planning phase; we have not bought or signed anything yet. Our equity will amount to 26% of the total cost. And:..... YES! The calculation of ancillary costs + acquisition costs + furnishing items that must be purchased in addition to the existing furniture is more complex than buying the house and land. We want to manage the financing exclusively with a very low remaining debt at the end of the 15-year term. If it is ultimately not possible to plan accordingly, we will NOT build. I may even be able to eliminate the remaining debt during the repayment of the loans with special repayments. Our goal was also, as described by others here, to save even more equity, but time is working against that. (Interest and moderately rising construction costs). And there is always a risk. Every era has its pitfalls. The world belongs to the brave, ..not the reckless. And very important: If someone gives me advice on what all must go into the house: don’t let yourself be driven crazy! We will build "based on needs." We are not in competition with others, that is very important. No luxury, but a reasonable dwelling!

The medium-term loans are highly competitive, meaning those with a term of 5-10 years. Always keep something in reserve, otherwise the whole thing becomes a house of cards. Many want to pay off the mortgage as quickly as possible and then overextend themselves, and the bank is happy then.