The financing of the own four walls is on the one hand a not completely favorable and on the other hand a usually long-term affair. Ideally, builders will have already saved up at least 20 percent in equity by the time they need to finance a property. Nowadays, it is also possible that one hundred percent of the amount is financed – but then you have to reckon with an interest surcharge.
Factors for the calculation of construction financing
Ultimately, to determine the appropriate amount to finance a property, you need to know three values:
1. How much does the property cost?
For one thing, you should know how expensive the property will be, including all building trades, land costs, landscaping, fees and possible new furniture. Experience shows that you should definitely add another ten to 20 percent buffer to this sum.
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2. How much equity do you have?
Secondly, you should know your equity. Equity includes all money available to builders in the short term: savings, stock deposits, and money available in checking accounts all count toward equity. The colloquially known "muscle mortgage" can also be considered as equity: Services that a builder can provide himself do not have to be paid for. The only important thing is to be realistic about your strength and your available free time when planning the amount of the "muscle mortgage" and not to overreach yourself.
3. What monthly charge is possible?
Thirdly, you should know what monthly load you can afford or want to afford. In determining the amount should also take into account incidental expenses, property taxes, building insurance and other costs incurred by a homeowner.
From the three values, a construction financing can be calculated. The basic component of a real estate financing is usually a mortgage loan. In this case, the property serves as collateral for the bank, which is also entered in the land register. A real estate loan is usually an annuity loan with a term of up to 25 years. Annuity loan means that the monthly sum from interest and repayment remains the same over the entire term of the loan.
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