Real estate credit guideline makes construction financing more difficult

The introduction of the Real Estate Lending Directive puts banks in the driver's seat and consumers too daring financing

You want a real estate loan? You are a civil servant, your spouse also has a good job? You live in munich, were born after 1980 and have found an inexpensive terraced house in a good location and with excellent building fabric? In addition, you have 250.000, – euro cash available for real estate purchase and additional costs, in order to finance the 500.000,- euro to finance your terraced house? Then you do not need to read further, because your real estate loan is safe for you. For anyone else to whom one or more of these factors just described does not apply, it may be difficult to obtain a real estate loan. Why? The housing credit directive (WIKR), which has been in force since march 2016, makes the search for a suitable real estate loan immensely difficult.

The new real estate credit guideline makes construction financing more difficult for normal earners

The approach adopted on 21. March in germany introduced EU requirement as a real estate credit directive pursued, appears at first glance right: more security for the consumer, more obligations for the lender. With it the legislator wants to avoid that the private buyer becomes over-indebted due to bad consultation and/or. That he falls for windy financings. So far – so good. Now strike however banks alarm: the new real estate credit guideline makes it impossible in many cases to grant normal earners a construction financing. Because one would have to make now prognoses over the entire period of the financing up to the complete repayment and thus ensure that the borrower can settle its debts also problem-free. Since banks are now liable for incorrect advice or. Inadequate financing can be held liable and sued by the legislator, they now try to grant only absolutely secure financing (z. B. Such as described at the beginning of this article).

The new real estate loan guideline requires,

  • That the construction financing loan can be repaid in full within the statistical life expectancy of the borrower,
  • That the bank may no longer assume an increase in the value of the property during the term of the loan and NOT include this calculated value as collateral in the financing
  • And that the borrower's income and assets are included as collateral.

The consequence is now that banks are much more cautious in granting loans if they have doubts that the monthly loan burden leaves too little for monthly living costs or that the borrower's income situation deteriorates with the onset of retirement (in the case of financing that extends beyond retirement age).

The real estate credit guideline takes banks into the legal adhesion

The real problem with the new real estate credit directive is ultimately the legal uncertainty for lenders: the directive was introduced by the legislature, but an exact legal definition was not formulated in the process. Critics now fear that the legislature will now leave the definition of content to the courts in the course of lawsuits. And that may now take years until binding legal guidelines are drawn to which lenders can adhere. As long as this has not happened, banks fear that in years to come, with the argument that the borrower's ability to service the loan has not been sufficiently examined, they will be held liable if the borrower can no longer meet his payment obligations and therefore sues the bank on the basis of the new real estate credit directive for wrong advice. Ultimately, this legal uncertainty leads to extra caution when granting loans.

Does the consumer protection of the residential mortgage directive go too far??

Since the introduction, it is now definitely more difficult to obtain construction financing. On the other hand, however, it is always a question of one's own financial possibilities, a comprehensively informed construction financing advisor and the amount of collateral as well as own funds that make a real estate loan financing possible or not.

Since currently many stationary banks proceed very defensively with the allocation, the contact to bank-independent mediators is recommended with interest in a real estate purchase. Thus z. B. ACCEDO has access to a pool of 250 lenders and can use this to find the right financing partner who is looking for security but is not overly cautious, thus offering reputable construction financing.

The good thing about the introduction of the WIKR is in any case that the sensitivity of the lenders is increased, in order to prevent a real estate bubble. The borrower is thereby also better sensitized to dangers and risks, which a credit financing always also brings with it. We believe that the first excitement after introduction again settle and it in the future also for normal earners will be further possible to finance a real estate purchase respectably and surely, as long as this financing concept is not sewn on edge, running time long and initial repayment are high as well as at least 20 – 30 per cent own funds for the purchase are available. Thus still many can profit in this and in the next year from the very envious building financing interest and realize themselves the dream of the own home.