Financing a property is consequently the most important financial decision in life. Because it will determine the financial planning of everyday life for decades. The following construction financing checklist will help you to get an overview of the most important questions and the required documents. Long before the realization of your project – the purchase of an existing property, a condominium or the new construction – you should begin to put your wishes and ideas on paper and at the same time check what financial leeway they can count on to be able to secure, serious and ultimately favorable construction financing. Always the most important goal: to be debt-free as quickly as possible.
Construction financing checklist – from initial considerations to a no-obligation inquiry.
At the beginning the most important question: why do you want to buy property?
- You want to get out of renting, preferring to use the money you pay monthly to your landlord as part of your asset accumulation?
- Or are you looking for the freedom of development – preferably with open space? Or prefer to live close to the city center, but with enough (living) space to feel comfortable?
- Or are you pragmatic and already thinking about retirement planning at a young age?
Which decision you make under these three scenarios will significantly influence your next steps. You will have to look differently for an existing property with a garden than for the condo in the city center. If you are particularly concerned about old-age provision, it is more your wishes and less the location in the prosperous environment that counts. A young family, on the other hand, has to look at the location and the associated child-friendly infrastructure, as well as the professional feasibility (transport connections, distance to the workplace, home office). In addition, the bank will evaluate a village property differently than the condominium in the center of a large city.
The property search checklist:
- Do I prefer to live in the city, on the outskirts or in the countryside??
- Does my career plan require me to work in different locations?
- What are my family plans??
- How much money can I currently put aside each month?
- How much money I currently have in the fixed deposit and current account, which investments can be canceled at any time and therefore quickly available ?
- Is there the possibility of financial allowance or. Support from your family circle?
These questions are aimed at your individual financial planning for the medium-term future. If you work in the city but want to live in the country, this means additional investment in mobility. The urban lifestyle suggests that one would not want to live in one place for life and rent or resell the property at some point in the future. This, in turn, can mean a rather short construction financing – and that under other key points. The house for retirement, on the other hand, will be more secure to finance with a long-term fixed interest rate.
The cottage on the outskirts of the city is fundamentally different from the condo in the middle of the city. If you know that in the future you will have to change your job more often in order to realize your career aspirations, your real estate wishes will be more in the direction of condominium or. Wealth accumulation go (to sell this property possibly already in 10 years, in order to use it in another place z. B. To finance a house. This is also a first approximation of the term of the loan).
If family and children are important to you, your financial plans for the future will be different (the term of the loan will be more long-term) than if you can imagine a future without children. And the question about your own cash answers the question about the possible loan amount. Both together define the maximum purchase price – and this in turn the size and location of the desired property.
Construction financing checklist – what can I afford??
Start by determining the purchase price that does not exceed your financial limits:
- If you live for rent, take your current cold rent. Since this will be waived after you move to the new property, this is an amount that you are guaranteed to be able to afford each month for interest and repayments.
- Heating and electricity costs will still be due, of course, even if you own your own home. Since energy costs are currently difficult to predict for the future, you should add another 50 percent to their current costs to come up with a ballpark figure.
- Similarly, costs for garbage collection or property tax continue to accrue.
- Newly added maintenance costs (a new heating system, triple-glazed windows or interior or exterior painting), for which you should build reserves. A value of ca. 3.500 euros a year should be budgeted for future maintenance of the property. If the existing property is already one or more decades old, it is appropriate to have ca. 5.000 euros / anno to plan and save annually.
How is the monthly loan amount calculated?
A small example calculation of how to calculate your future realizable monthly burden for interest and repayment:
- Current cold rent: + 1.000,- EUR
- Current savings amount per month: + 500,- EUR
- Management costs per month (approximate value for ca. 100 sqm): – 350,- EUR
- From this it follows that the future loan installment is 1.Should not exceed EUR 150.
This simple calculation will ensure that you do not have to restrict your current standard of living when financing the purchase property. If you want to go into financial planning in detail right away, we recommend the accedo AG budget calculator. With the help of this checklist, you can calculate the financial requirements in even more detail:
> to the budget calculator
For 1.150, – euro monthly repayment installments for interest and repayment in the construction financing, you can expect the following real estate purchase price:
With an interest rate of 2.5 percent, an initial repayment of 2 percent, this results in a maximum loan amount of ca. 300.000,- EUR.
From the available equity capital (e. B. 100.000,- EUR) you draw approx. If you deduct 10 percent of the purchase price of the property (the so-called ancillary purchase costs for real estate agent, notary and property tax must normally be paid with your own funds), this results in a purchase price for the property of approx. 360.000,- EUR (to the calculator). In the subsequent property search, you should therefore only consider properties that do not exceed or only insignificantly exceed the purchase price, which is made up of the available equity and the calculated amount for the monthly installment burden for interest and repayment.
But beware: ancillary purchase costs are not paid via a loan but from own resources.
All ancillary construction financing costs (broker and notary costs, land tax, land register entry) should be able to be paid from your own funds, as these are not part of the construction financing loan. A construction financing loan actually covers only the acquisition resp. The construction costs from.
The additional costs range from 5 to 15 percent (depending on the state as well as whether a broker is involved in the purchase). In this example case (purchase price: 400.000,- €) would be as additional costs thus 40.000,- EUR still to be added.
Briefly summarized: own funds 100.000,- EUR , credit amount 300.000,- EUR. Possible purchase price 360.000,- EUR, in order to be able to pay with a monthly loan installment of approx. 1.To be able to finance 150,- EUR.
Checklist construction financing – which construction financing is suitable for me?
So you know that in this example case, you're looking at a construction loan of approx. 300.000, – EUR can afford without exceeding your financial framework. In addition, this example calculation is based on an annuity loan, i.E. A loan whose monthly charges do not change over the entire term.
In the next step you should not rely solely on the offer of your house bank to. Also get some more from direct construction finance providers like z. B. ACCEDO AG to find the best financing for you. Important is not only the interest rate or the amount of the monthly installment.
Fast repayment of the loan (i.E. As fast as possible freedom from debt), flexibility z. B. Through free unscheduled repayment options, the longest possible term and high initial repayment are the most important criteria to pay attention to then.
Construction financing checklist – the 4 most important key points.
- 1. Loan type: the safest option is the annuity loan, d. H. During the term the monthly charge does not change. Recommended for security-conscious is the full repayment loan, d. H. They use the current offered interest rates until the construction financing loan is completely repaid.
- 2. Term: currently, long-term fixed interest rates are more recommended. Too short loan forms (z. B. 5 or 10 years) entail the risk that after the expiration of the financing at the end much more expensive further financing must be financed, because in the meantime the interest rates have risen further. In addition, with long-term fixed interest rates, you always have the option of cancelling the loan after 10 years without any problems or costs, in order to be able to finance the subsequent loan at a lower rate.
Important: the amount of the repayment determines how quickly a loan is repaid.
- 3. Repayment: the higher you set the repayment, the faster you will be debt-free the 2 percent set in our example calculation is not sufficient to be debt-free very quickly. If you can afford higher repayments all the better…
- 4. Special repayment: if during the loan period you receive inheritances, proceeds from major disposals, etc. If you do not expect a higher interest rate, unscheduled repayments are a good way to become debt-free before the end of the agreed loan term. Banks often offer unscheduled repayments – for example 5 percent of the initial loan amount – and then charge a higher interest rate. If you decide for a higher repayment, the offer is usually better. However, you should only pay with a higher interest rate for the faster debt freedom if you can also use them the unscheduled repayment.
Construction financing checklist – for the consultation meeting.
You have now found a suitable property and know that it must go now quickly. Therefore, bring the following documents with you to your first meeting:
- Expose or. Description of the desired object (if already available)
- Salary statements of the last 3 months (from all borrowers – so usually also from your wife or husband). Your husband
- Proof of your asset situation (available cash and savings contracts, shares, funds and other investments)
- Indication of whether you are signing the loan agreement alone, together with a life partner or with family members.
For a first offer you go to your bank and look for contact with direct brokers (using your own checklist construction financing). The major nationwide home loan brokers have the advantage of being able to compare offers from more than 400 banks. Consider also that already a 0.1 percentage point lower interest rate brings several thousand euro savings.
It is important that all construction financing offers are based on comparable assumptions (term, interest rate, repayment, flexible building blocks, etc.).), in order to be able to make a decision for the best offerer.
Check the quality of advice provided by your advisors
The quality of the advice is also reflected in the extent to which the provider, in addition to the traditional construction financing also options of subsidized or. Subsidized credit opportunities addresses.
You should become cautious if mixed financing via fund savings, life insurance or similar are offered. In most cases, these mixed financing arrangements only increase the commission of the intermediary and bring you a higher risk. Such models are only profitable if the increase in value after deduction of fees and commissions brings more than the construction loan costs.
In the conversation, also address the commissions that the agent or the bank receives. Reputable direct lenders have already priced your commission into the interest rate and do not charge an additional commission. This means that you do not incur any costs for advice, concept creation and processing.
Let providers know that they are in competition with other banks and intermediaries. Also ask when the agreed loan amount will be azur verfugung after the contract is signed; normally 2 weeks should be sufficient from application to payment.
Checklist construction financing – so you have the best chances.
Mt following criteria, you have the best chance to get a low interest home loan:
- Civil servant status or long-term employment
- Own use of the property
- Large fixed salary portion (and no large dependence on royalties or success fees) in good locations (and not in economically difficult regions)
- New construction properties or those in good condition
- Good credit standing
But of course, there are also opportunities, z. B. Financing properties in rather poor locations (z. B. Farms in rather poor condition and in rural areas or old building renovations); this is then again a question of own funds, reputation and income.
Basically, however, it always makes sense before you take out a purchase or. Have made the decision to go with the bank or a direct broker. With the preparation of this checklist construction financing you then not only have the important key points for the conversation, but also give the lender to understand that you are familiar with the subject and well informed. And in such a way you experience in the direct discussion, what is possible for you then actually.