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.
Just talk to your bank. Everything depends on how your existing property is valued, and no one here in the forum can give you a reliable answer on that. It’s possible that your bank doesn’t (prefer to) handle bridge loans, sometimes it depends on the bank’s expertise and whether they are willing to get involved at (reasonable costs). You should get at least two or three offers.
You can of course also take control of the situation by effectively selling your existing property, moving into a rental property, and then approaching the bank. That way, you know your equity, have it liquid, and are more or less flexible—though of course that means an additional move and rental costs for period x.
You can compare these (estimated) costs (and the extra time/stress involved!) with the costs of a bridge loan to see if it’s worth it.
Best regards,
Dirk Grafe
You can of course also take control of the situation by effectively selling your existing property, moving into a rental property, and then approaching the bank. That way, you know your equity, have it liquid, and are more or less flexible—though of course that means an additional move and rental costs for period x.
You can compare these (estimated) costs (and the extra time/stress involved!) with the costs of a bridge loan to see if it’s worth it.
Best regards,
Dirk Grafe
Hello, free yourself from the idea of being able to solve the problem "optimally."
From my own experience, I recommend handling things step by step. We sold our house, moved into a rental apartment, and started looking for a new property from there. After three years of searching, we found the right house for us and purchased it with the help of the bank.
With the money from the house sale, we paid off the remaining mortgage including any prepayment penalties, and kept the rest in the bank account.
To avoid prepayment penalties and a second move, you need ideal conditions. These are rarely found in life. And if they are, it’s easy to become overwhelmed.
From my own experience, I recommend handling things step by step. We sold our house, moved into a rental apartment, and started looking for a new property from there. After three years of searching, we found the right house for us and purchased it with the help of the bank.
With the money from the house sale, we paid off the remaining mortgage including any prepayment penalties, and kept the rest in the bank account.
To avoid prepayment penalties and a second move, you need ideal conditions. These are rarely found in life. And if they are, it’s easy to become overwhelmed.
Hello,
we have had a few discussions now to finally get things moving:
A quick recap of the situation:
End-terrace house owned, outstanding mortgage around 100,000 euros (with early repayment penalty approx. 115,000 euros), current estimated market value by real estate agent after inspection about 230,000 euros; a very secure achievable amount due to the sought-after location; this means roughly 100,000–115,000 euros net profit „sleeping“ in the house when selling.
We are both public sector employees, combined net income 4,500 euros monthly (approx. $4,800), with a tendency rather to increase than decrease, 2 children, no further loans.
We have been strongly advised several times to quickly secure a developer-free plot of land, which is already almost impossible in northern Berlin / the commuter belt. Also, I do not want to be tied to a developer and only want to pay property acquisition costs for the land, not for the entire project.
Scenario 1: Put the house on the market, find a buyer who pays the purchase price and is willing to move in at a later date. We stay in the house initially, either renting or providing some other compensation to the buyer. The old mortgage is paid off, and we have the actual equity available for, for example, purchasing land.
Scenario 2: Seek bridge financing of around 100,000 euros and use it to buy and fully pay for the land. Begin construction planning and list the house for sale so that the sale and moving in coincide. The paid land would replace the equity. The house sale proceeds would repay the bridge financing.
Scenario 3: Neither selling (for now) nor bridge financing, remain in the house, take out a new loan only for the land but without using equity (additional acquisition costs would have to be financed). Bridge finance 50,000 euros to get the loan for the construction, keep the remaining 50,000 euros in cash for the sale, possibly consolidate the separate land loan with the construction loan later.
I hope I have put this into understandable words. Maybe you have more or different / better suggestions or scenarios.
we have had a few discussions now to finally get things moving:
A quick recap of the situation:
End-terrace house owned, outstanding mortgage around 100,000 euros (with early repayment penalty approx. 115,000 euros), current estimated market value by real estate agent after inspection about 230,000 euros; a very secure achievable amount due to the sought-after location; this means roughly 100,000–115,000 euros net profit „sleeping“ in the house when selling.
We are both public sector employees, combined net income 4,500 euros monthly (approx. $4,800), with a tendency rather to increase than decrease, 2 children, no further loans.
We have been strongly advised several times to quickly secure a developer-free plot of land, which is already almost impossible in northern Berlin / the commuter belt. Also, I do not want to be tied to a developer and only want to pay property acquisition costs for the land, not for the entire project.
Scenario 1: Put the house on the market, find a buyer who pays the purchase price and is willing to move in at a later date. We stay in the house initially, either renting or providing some other compensation to the buyer. The old mortgage is paid off, and we have the actual equity available for, for example, purchasing land.
Scenario 2: Seek bridge financing of around 100,000 euros and use it to buy and fully pay for the land. Begin construction planning and list the house for sale so that the sale and moving in coincide. The paid land would replace the equity. The house sale proceeds would repay the bridge financing.
Scenario 3: Neither selling (for now) nor bridge financing, remain in the house, take out a new loan only for the land but without using equity (additional acquisition costs would have to be financed). Bridge finance 50,000 euros to get the loan for the construction, keep the remaining 50,000 euros in cash for the sale, possibly consolidate the separate land loan with the construction loan later.
I hope I have put this into understandable words. Maybe you have more or different / better suggestions or scenarios.
N
nordanney9 Feb 2015 14:47Everything is well summarized. Since properties are currently in high demand, I would choose option 1 (which is what we did as well, with roughly 1.5 years between selling and moving—in that time, we were tenants). This works smoothly because the seller is in a stronger position than the buyer (at least for now and in good locations). Most importantly, you gain certainty for your financing plan if you don’t get the expected sale price (unfortunately, most property owners tend to have a very subjective view of a purchase price).
It’s all a matter of personal preference. You’ve probably gathered enough pros and cons from the collected posts.
It’s all a matter of personal preference. You’ve probably gathered enough pros and cons from the collected posts.
What do you think about the idea of looking for a plot of land and taking out a new loan for it, which would be paid off separately? Would we even be able to get that if there is still another loan of about €100,000 (approximately $110,000) outstanding? With our monthly creditworthiness, it would be easy to manage. The construction would happen later, as would the house sale. The reason is that I would like to have some of the potential profit from the house sale available as “cash.”
Or would this cause any problems? I'm having trouble really understanding the practical aspects of this… 🙁
Or would this cause any problems? I'm having trouble really understanding the practical aspects of this… 🙁
N
nordanney10 Feb 2015 11:09ductom81 schrieb:
What do you think about the idea of searching for a plot of land and taking out a new loan for it, to be repaid separately? Would we even be approved if there is already another loan of around 100,000€ (about $110,000) outstanding? With the monthly creditworthiness, it should be easy to manage. Construction would happen later, as would the house sale. The background is that I would also like to have some of the potential profit from the house sale in cash. Or does this create any obstacles? I’m having trouble wrapping my head around this practically… 🙁 That’s the option number 3 you mentioned, right, or am I misunderstanding?