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
nordanney10 Feb 2015 11:49You already know my personal opinion. However, I believe that you don’t yet really know what you want.
Regarding option 3, consider the following:
- Not all banks will provide financing for the land alone (for mortgage banks, it is not acceptable as sufficient collateral)
- Financing amount for the land is usually 60-80% of the market value (standard land value), the rest must come from your own funds
- The bank will require a mortgage registered on the property = additional costs
- If the financing agreement includes a fixed interest rate, no other bank will agree to subordinate their loan for the house financing. If you want to use a different bank, there will be extra costs (prepayment penalties, assignment/cancellation/new registration of the mortgage). The first bank may impose unfavorable terms in such cases.
By the way, you can always regard the cash from the house sale as available 😉
Regarding option 3, consider the following:
- Not all banks will provide financing for the land alone (for mortgage banks, it is not acceptable as sufficient collateral)
- Financing amount for the land is usually 60-80% of the market value (standard land value), the rest must come from your own funds
- The bank will require a mortgage registered on the property = additional costs
- If the financing agreement includes a fixed interest rate, no other bank will agree to subordinate their loan for the house financing. If you want to use a different bank, there will be extra costs (prepayment penalties, assignment/cancellation/new registration of the mortgage). The first bank may impose unfavorable terms in such cases.
By the way, you can always regard the cash from the house sale as available 😉
nordanney schrieb:
You already know my personal opinion. However, I believe you don’t really know what you want yet.
Regarding option 3, keep in mind:
- Not all banks will provide financing for the land alone (for real estate banks, this is not suitable collateral for covered bonds)
- Financing amount for the land? Usually 60-80% of market value (land reference value), the rest from equity
- The bank will already receive a land charge = costs
- If the financing is concluded with a fixed interest period, no other bank will accept subordination for the house financing. If you want a different bank, costs will apply (prepayment penalty, assignment/cancellation/new registration of land charge). The first bank will likely impose unfavorable conditions on you.
By the way, cash from the house sale is always visible 😉In which situation can I actually see the cash? Only when selling and then temporarily moving into a rental property?
N
nordanney10 Feb 2015 12:57No, it is also possible if you keep your currently occupied property (intending to rent it out) and then take out additional financing beyond the existing mortgage. You don’t have to invest every euro earned into the new property. Otherwise, of course, this applies with every sale—sooner or later. The question is: What do you actually want???
nordanney schrieb:
No, it’s also possible if you keep your current residence (intending to rent it out) and then secure additional financing beyond the existing mortgage. You don’t have to invest every euro earned from that in the new property. Otherwise, of course, with any sale – sooner or later. The question is: what do you really want???I want to move out of the terraced house and realize my own construction project without putting myself under any particularly risky financial pressure. Renting it out is not an option; that’s excluded. All equity is tied up in the property.
