Construction financing: here's what to consider when buying or building your own home. Low interest rates and high rents – the perfect time to buy a condo or build a house. All that is needed is the right construction financing. A large project. What to consider up front?
Have you thought about using a construction financing calculator to compare the offers on the market? We have talked to the experts of Baufinanzierung Regio. They have told us the top five mistakes that are made in the process.
1. Mistake: Look for dream property first, then inquire with bank
One family set out to find their dream home without even knowing what their financing options were. This was a big mistake. You have quickly found the perfect apartment – great location, large rooms, top accessibility and tranquil. "This apartment and no other!", it was said. But at the bank quickly came the disappointment: "With this income and equity, you can not afford the apartment."
It makes more sense to: first go to the bank and have a rough estimate worked out. There also does not matter which bank you go to. If your house bank has a financing margin of
280 000 Euro, then you will not get a loan of 350 000 Euro at any other bank. So you know right away in which order of magnitude you have to look and whether it is perhaps worthwhile to wait a few more years with the financing. In the time you can save, increase your equity and thus improve the chances of getting the loan.
2. Mistake: Underestimating ancillary costs, forgetting house payments and renovations
In Germany, the regular ancillary costs when buying property amount to between 9 and 14 percent of the purchase price, depending on the federal state. When buying an apartment for 200.000 euros, we would have incurred additional costs of up to 30.000 euros. This is divided between the land transfer tax and payments to the broker and the land registry office. What is often forgotten is the house payments. This is what happens in apartment buildings. This usually pays for a janitor, builds reserves for renovations and covers management costs. Depending on the equipment of the house (elevator, underground parking) and the extent (janitor service, winter service), this can amount to 300 euros or even more per month.
Financial double burden due to renovation
What can also quickly go into the money when buying older condominiums is a renovation. "We'll just take out the carpet and put in a new floor," one family told us. They were not aware that this could quickly cost up to 5,000 euros, depending on the quality of the floor and who installs it. You should also not underestimate the time it takes to remove old carpet from the 1970s, for example.
If the new apartment has to be renovated, there is also a financial double burden. We still have to pay rent for the old apartment because the new one is not yet habitable. At the same time, electricity, water, house payments and perhaps the first installment of the loan must be paid for the new apartment. In addition comes at the end of course still the removal and perhaps also the acquisition of new furniture. You have to take all of this into account in your financing.
3.Mistake: Monthly expenses glossed over for the bank
To get a loan, you have to fill out a so-called self-disclosure for the bank. There you specify your income as well as your monthly expenses. The higher the expenses, the less money remains to pay the installment for the loan. In the worst case, you may not even be granted a loan at all. Therefore, it is of course tempting to make these expenses a little more beautiful and less to indicate, in order to get the credit for the dream apartment. "Then we'll just save a little, we'll manage," one prospective homeowner told us. Trust us: you can't do it.
Simulate the installment
It says itself easily to live a few years on water and cornflakes. But actually doing it is another matter entirely. We recommend a test phase over half a year. Simulate the future installment payment. Set aside the difference between your current rent and your desired installment, with which you want to repay the loan, already now. Let's assume that your monthly installment is 2000 Euro. To this we add 300 euros in house money. In our example, the current warm rent is 1200 euros. In order to simulate a worst case scenario, you now put aside 1100 euros every month. Best to have your own account. This money is off limits for you during the test phase. Together with the current rent, this is the amount you will also have to pay in the future. If you do this for six months, you will notice how much money you actually have left at the end of the month. The conclusion of our family was: "We have overestimated ourselves a little bit. With our planned rate, we could not even go to the movies anymore. We have now reduced the rate by 500 euros."What is the point of a dream apartment if you have to starve in it or can't even go on vacation for 20 years?? Consider it well.
4.Mistake: Not taking precautions for emergencies
It's a topic no one likes to talk about, but especially with a construction financing that runs for 20 years and amounts to more than 200,000 euros, you have to ask yourself the question: What happens if the partner dies? Paying alone what was previously paid in pairs is impossible. There are insurances for it. Inform yourself in advance and be sure to protect yourself.
5.Mistake: Don't compare
Construction financing consists of many building blocks. Small loans and home savings contracts complement each other to form an overall financing package. Depending on your choice, the deal is better or worse – and the choice is enormous. To make sure you know if your local bank has made you a fair offer, we recommend getting other quotes calculated out. Then you could choose the package that suits you best.
This service is offered by the comparison portal "Baufinanzierung Regional". Completely free of charge and without obligation, you will receive the best offers in the construction financing calculator, which perfectly fit your requirements. All offers include a personal consultation on site. Because nothing beats an advisor who explains the conditions and, above all, the fine print of the loan to you in a personal meeting.
On the portal, you can also use the premium calculator to immediately determine for yourself which offers suit you best. The best thing to do is to get a detailed non-binding offer directly from the providers that most appeal to you. Then you have the best comparison for your construction financing.