Construction financing for beginners – good planning saves money

For many people, building their own home or buying a condominium is a decision for life. Depending on the volume, real estate financing can take half a lifetime to complete. It pays off to invest time in planning so as not to experience any unpleasant surprises in the end.

Tips for construction financing for beginners:

In the best case, a house or apartment purchase starts half a year before the concrete search is made. From the financial check over first discussions with a possible financing – house bank and direct mediator – up to the Eruierung of the situation – with children perhaps nevertheless rather in the countryside? In old age, with a quickly accessible infrastructure? – it can take some time before you have all the facts and figures at your fingertips before you start looking for a property that can be financed or a suitable plot of land. In the following, we would like to give you some tips on construction financing for beginners that will make your real estate wish a reality:

1. Financial planning

The available equity is the basis of all decisions. How much can you save?? There are providers who can give you a 100&-Pre-calculate financing. But be careful: to start entirely without equity increases the risk immensely. In addition, a construction financing will be much more expensive than if you can bring 20 to 30 percent of your own funds, because the interest rate is always based on the so-called loan-to-value ratio. Our recommendation: an 80% loan (d.h. You bring 20% of your own funds with you) it should already be.

This means: Mobilize as much equity capital as possible. How much I have in reserves? Can I use my building savings contract or Wohnriester? Do I get a gift from my parents? Skilled craftsmen can save up to ten percent on financing costs.

Keep in mind that additional costs such as real estate agent, land registry, notary fees, land transfer tax, etc. are not covered by the construction financing. cannot be paid via the construction financing. You already need your own funds for this – 20.000 EUR additional costs are not uncommon.

How much can you afford to pay for your construction financing each month??

For this purpose, it is essential to take stock of your current financial situation: questions such as "how much net household income do I have per month" can be answered quickly. It becomes more difficult when it comes to determining your own standard of living: How much do I need per month for food, clothing, maintenance costs, insurance, car(s), vacation trips, hobbies or the children?? It is important that you do not have to drastically lower your standard of living after taking out a construction loan. This may be possible for a short time. But do you want to spend half your life turning over every euro twice before you spend it?? Some partnerships have already failed due to a too massive savings course.

In addition, you should always be able to save reserves in order to be able to cushion unforeseen events such as illness, loss of job or the addition of children. Retirement provision is also important.

This means: Find out all current living costs and calculate a monthly budget that you would like to set aside for your retirement provision. If these figures are on the table, it results in an amount that you can afford monthly for the construction financing (interest and repayment). The best thing to do is to discuss the results of your cash-flow analysis with a construction financing expert even before you start your concrete real estate search.

2. Calculate construction financing options

In the meantime, there are many financing options, on the one hand in terms of term and repayment, on the other hand in the flexibility of your construction financing contract. Who does not know the market exactly, which should look for now the discussion with a Baufinanzierungsexperte.

In addition, do not rely on only one offer of the (house) bank. A comparison saves cash. Direct construction financiers are often more favorable and are also in a position to offer you customized offers – tailored to your life situation and life phases. Pay particular attention to the flexibility of the contract: Are installment adjustments possible during the term of the contract?? Can you also repay more once, if you z. B. receive an inheritance? How long is the term – currently, due to the favorable interest rate, terms of 15 or more years are advantageous?

This means: Get the opinion of experts for your financial planning. Go for long terms with high repayments (at least 2%) and make sure that the contract is as flexible as possible.

3. Check subsidy options for your construction financing

The KfW (Kreditanstalt für Wiederaufbau) offers e.g.: low-interest, subsidized loans for energy-efficient construction measures as well as for age-appropriate measures. In the same way, building society contracts or the possibilities of Riester subsidies should be examined. In addition, some states and municipalities offer seperate pots.

Often, however, in a low-interest phase, which we are still in, it is more favorable to rely on a "pure" construction financing. This is especially due to the fact that some grants also come with requirements. This raises questions such as: "Do we really need a passive house standard that is subsidized but still more expensive in the final price than a "normal" standard?? Or does the insulation of an old property make sense in the cost-benefit calculation – also considering the resale price?"

Construction financing for beginners: Consult with the experts

This means: Have the subsidy options checked by experts and calculate exactly whether it is not cheaper to build and renovate "as standard". If you plan to use the property as a retirement home, the resale price is an argument, but not as important as if you assume that you plan to move in the future.

4. Start looking for the best construction financing partner

Once the key data of financial possibilities and financing are clear, one can start looking for the suitable property, developer or architect. Here applies: Stay hard and real, if you find a supposed dream property, but it is above your calculated financial possibilities. A dream can quickly become a nightmare.

Clever house builders dimension your house in such a way that you can add on later and start smaller for now. Because smaller properties save not only purchase money, but also have clear advantages in maintenance and energy costs.

That means: Stay realistic, don't overdo it and stick strictly to the budget that the cash-flow analysis showed as a possible monthly burden, without having to drastically reduce your standard of living.

5. Timing for your construction financing

It is good to start with a construction measure in spring. Do not underestimate the additional, unplanned costs that can arise from delays due to a construction start in late summer, bad weather and frost. That's why now is the best time to start planning. For a six-month lead time before construction or renovation begins is what you should be looking for. It still remains quiet on the construction financing market – the interest rates rise again at a low level – but a sudden increase in construction interest rates is not to be expected. Construction financing for beginners also means, however, to consider your financial possibilities in advance

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