ᐅ Relation between Construction Cost and Financing – Survey
Created on: 11 Aug 2019 18:30
H
Hauswunsch 23
Hello,
the traditional rule is that the equity share should be at least 30% of the construction cost/purchase price. Also, that the loan installment should not exceed 40% of the income (preferably only the main earner’s salary).
But how many still stick to these ideal criteria nowadays?
I’d be glad if users shared their percentage figures.
Best regards and have a pleasant Sunday evening
the traditional rule is that the equity share should be at least 30% of the construction cost/purchase price. Also, that the loan installment should not exceed 40% of the income (preferably only the main earner’s salary).
But how many still stick to these ideal criteria nowadays?
I’d be glad if users shared their percentage figures.
Best regards and have a pleasant Sunday evening
H
HilfeHilfe11 Aug 2019 21:06Hauswunsch 23 schrieb:
I understand what you mean, but I’m not expecting the exact percentage. I just wanted to check how much importance is still placed on these numbers. For me, they are the foundation of secure financing. So far, all users have met both benchmark values or have been able to offset a poor value with a very good one. There is advertising everywhere for 100% financing, but who actually does that?! Many do it, and the banks go along with it; otherwise, they wouldn’t make any money at all.
Unusual for us: 65% equity (5% of it from our parents), an annuity payment of 30% of net income, and a repayment rate of 11%, meaning the loan will be fully paid off in 9 years. We will then be 52 and 47 years old.
I was taught in my youth (90s) that 40% equity was standard, and I have stuck to that principle. I also learned in 2000 and 2008 that in the financial world, the phrase "this time it's different" usually turns out very costly.
The financing results from a high savings rate over 10 years and a relatively affordable new build (mid-terraced house) without much exterior luxury in the suburban belt. We wanted to pay it off quickly, so completing it within 9 years is feasible even with a lower monthly burden than during the savings phase (when we were still renting). Also, my wife’s 60% work commitment has been reduced to 0% to allow for a calm pregnancy and childcare at home; this was factored into the plan. For many, this might seem very conservative, but we find it ideal. We have likely stayed well below our financial potential (compared to what others in our situation are financing here), but overall we are happy with our house and our situation.
I was taught in my youth (90s) that 40% equity was standard, and I have stuck to that principle. I also learned in 2000 and 2008 that in the financial world, the phrase "this time it's different" usually turns out very costly.
The financing results from a high savings rate over 10 years and a relatively affordable new build (mid-terraced house) without much exterior luxury in the suburban belt. We wanted to pay it off quickly, so completing it within 9 years is feasible even with a lower monthly burden than during the savings phase (when we were still renting). Also, my wife’s 60% work commitment has been reduced to 0% to allow for a calm pregnancy and childcare at home; this was factored into the plan. For many, this might seem very conservative, but we find it ideal. We have likely stayed well below our financial potential (compared to what others in our situation are financing here), but overall we are happy with our house and our situation.
Could we perhaps agree that when someone shares information, it would be helpful to include the total construction cost, the year it was built, and how much the project cost? Additionally, the age of the homeowners would also be useful. Especially how the equity—around 50% or more—was accumulated, as I assume most people already owned something before.
Example from us:
20% equity from selling a property
34 years old at the time
Construction started in 2015, contracts from 2014
Total cost 450,000 (including land)
About 30% of net monthly income goes toward it
I would do it again anytime.
Example from us:
20% equity from selling a property
34 years old at the time
Construction started in 2015, contracts from 2014
Total cost 450,000 (including land)
About 30% of net monthly income goes toward it
I would do it again anytime.