Hello everyone,
I need some help and advice and hope to get a few suggestions on how to proceed.
In 2010, we bought an end-terrace house in northern Berlin in a very desirable location (120 sqm (1,292 sq ft) living space, 250 sqm (2,691 sq ft) garden, 3 floors, parking space, excellent infrastructure) at a very favorable price (bankruptcy sale).
This house is now to be sold for a new construction project, as private circumstances have changed and the house no longer meets many of our new requirements.
What is the best way to proceed here?
How can one coordinate the sale of the current house with the new project?
What options are there to handle this financially in the smartest way possible?
What risks should be considered?
What does a term like “property swap” mean in this context?
There is still an outstanding loan on our current house of about €98,000.
According to our research, the market value is around €200,000. Is it correct to assume that €200,000 sale proceeds minus €98,000 remaining loan and prepayment penalty equals my net profit?
The property has been continuously owner-occupied by us (so no capital gains tax to consider?).
Regarding the new construction project
We have clear ideas about the new house and have set a maximum budget of €350,000 for all related costs.
We have a net monthly income of €4,700, which I believe is above average. Are these assumptions realistic?
It would be great to receive some guidance or suggestions here.
I need some help and advice and hope to get a few suggestions on how to proceed.
In 2010, we bought an end-terrace house in northern Berlin in a very desirable location (120 sqm (1,292 sq ft) living space, 250 sqm (2,691 sq ft) garden, 3 floors, parking space, excellent infrastructure) at a very favorable price (bankruptcy sale).
This house is now to be sold for a new construction project, as private circumstances have changed and the house no longer meets many of our new requirements.
What is the best way to proceed here?
How can one coordinate the sale of the current house with the new project?
What options are there to handle this financially in the smartest way possible?
What risks should be considered?
What does a term like “property swap” mean in this context?
There is still an outstanding loan on our current house of about €98,000.
According to our research, the market value is around €200,000. Is it correct to assume that €200,000 sale proceeds minus €98,000 remaining loan and prepayment penalty equals my net profit?
The property has been continuously owner-occupied by us (so no capital gains tax to consider?).
Regarding the new construction project
We have clear ideas about the new house and have set a maximum budget of €350,000 for all related costs.
We have a net monthly income of €4,700, which I believe is above average. Are these assumptions realistic?
It would be great to receive some guidance or suggestions here.
N
nordanney20 Jan 2015 15:49GC = General contractor who builds the individually designed house from your architect as a turnkey or ready-to-move-in property (trades may be subcontracted). A fixed-price contract is concluded.
D
Doc.Schnaggls20 Jan 2015 16:03ductom81 schrieb:
We received the advice today (from someone at the Homeowners Protection Association...) that it’s best to first buy a plot of land and finance it separately, then build afterward...Great advice. 😕 Did this financing expert at least mention structuring the land loan as a variable loan, which can then be paid off and refinanced when building the house?
If not, with a fixed-rate loan you have almost certainly committed yourself 100% to your initial lender for the subsequent home financing, since that lender holds the first lien on the land registry.
In this scenario, you would hardly find a bank willing to register a second mortgage.
Best regards,
Dirk
Doc.Schnaggls schrieb:
Great tip. 😕 Did this financing specialist at least mention structuring the financing for the land as a variable loan, which could then be paid off and refinanced when building the house?
If not, with a loan that has a fixed interest rate, you are almost 100% tied to the initial financing bank for the subsequent home loan, since that bank holds first lien on the land registry.
In this situation, you would hardly find a bank willing to accept a subordinate position.
Regards,
DirkI roughly understand what you mean. Could you please explain it again in a way that’s easier for a layperson to understand? 🙂
D
Doc.Schnaggls20 Jan 2015 16:13Sure, I’ll give it a try:
When you buy a plot of land and finance it with a fixed-rate loan, the lending bank registers a land charge as security. This land charge holds the first priority in the land register. This means that if the property is ever foreclosed, this bank will be paid first.
Any bank registered afterward (in second priority), which would finance the house, would receive the remainder of the proceeds and might end up with a partial loss on their claim.
In other words: with this setup, the security for the second-priority bank is significantly less valuable, which will be reflected in less favorable loan conditions.
However, if the loan for purchasing the land has a variable interest rate, it can be repaid when financing the house (then integrated into the house loan), freeing up the first-priority land charge and allowing it to be used for the new financing.
Clearer now? 😉
When you buy a plot of land and finance it with a fixed-rate loan, the lending bank registers a land charge as security. This land charge holds the first priority in the land register. This means that if the property is ever foreclosed, this bank will be paid first.
Any bank registered afterward (in second priority), which would finance the house, would receive the remainder of the proceeds and might end up with a partial loss on their claim.
In other words: with this setup, the security for the second-priority bank is significantly less valuable, which will be reflected in less favorable loan conditions.
However, if the loan for purchasing the land has a variable interest rate, it can be repaid when financing the house (then integrated into the house loan), freeing up the first-priority land charge and allowing it to be used for the new financing.
Clearer now? 😉
yes 😉
for example, we would choose to buy a plot of land now (to build in 1 or 2 years) and finance it in addition to an existing house. how would this work financially? assuming the land costs around 80,000€ (about 86,000 USD), would this be a mortgage loan or a private loan?
and if we are absolutely certain that the bank financing the land will also finance the house in 1 or 2 years, how does that affect the situation?
for example, we would choose to buy a plot of land now (to build in 1 or 2 years) and finance it in addition to an existing house. how would this work financially? assuming the land costs around 80,000€ (about 86,000 USD), would this be a mortgage loan or a private loan?
and if we are absolutely certain that the bank financing the land will also finance the house in 1 or 2 years, how does that affect the situation?