ᐅ Sequence of Financing, Building Permit / Planning Permission, and Attic Conversion
Created on: 16 Aug 2016 11:56
B
bapouDear forum,
I have a beginner question that I have not yet found an answer to in the forum or online.
We want to buy a shell apartment in Berlin and convert it into a living space.
These usually cost around 1000–1500 Euro/sqm (93–140 USD/sqft) in good locations, with finishing costs of about 2000 Euro/sqm (186 USD/sqft) planned. Our equity is not quite enough to cover the purchase price of the shell.
What is a typical process to both secure the shell promptly and provide the bank with enough information for financing?
My current understanding:
An inspection with an architect, a rough draft plan, and a discussion with the building authority about what is possible. This would allow an approximate cost estimate.
If you then carry out the planning including the building permit/planning permission, half a year might pass—and the seller cannot be kept waiting that long. On the other hand, without a building permit/planning permission, the risk is too high, and the bank probably will not provide financing approval.
Alternatively, shell apartments with an existing building permit/planning permission are often offered. However, the approved plans usually do not match our wishes.
Is it possible to get a loan based on these approved plans and a rough cost estimate for the desired design, and then submit the new building permit/planning permission and construction description before the construction funds are released? The disadvantage here is that the exact construction costs are not yet available when applying for the funds.
Or is it only possible to buy and renovate if you pay for the entire shell from your own equity when you do not want to use the existing plans?
I would appreciate any answers or hints to where I can find more detailed information.
Thank you very much,
Tom
I have a beginner question that I have not yet found an answer to in the forum or online.
We want to buy a shell apartment in Berlin and convert it into a living space.
These usually cost around 1000–1500 Euro/sqm (93–140 USD/sqft) in good locations, with finishing costs of about 2000 Euro/sqm (186 USD/sqft) planned. Our equity is not quite enough to cover the purchase price of the shell.
What is a typical process to both secure the shell promptly and provide the bank with enough information for financing?
My current understanding:
An inspection with an architect, a rough draft plan, and a discussion with the building authority about what is possible. This would allow an approximate cost estimate.
If you then carry out the planning including the building permit/planning permission, half a year might pass—and the seller cannot be kept waiting that long. On the other hand, without a building permit/planning permission, the risk is too high, and the bank probably will not provide financing approval.
Alternatively, shell apartments with an existing building permit/planning permission are often offered. However, the approved plans usually do not match our wishes.
Is it possible to get a loan based on these approved plans and a rough cost estimate for the desired design, and then submit the new building permit/planning permission and construction description before the construction funds are released? The disadvantage here is that the exact construction costs are not yet available when applying for the funds.
Or is it only possible to buy and renovate if you pay for the entire shell from your own equity when you do not want to use the existing plans?
I would appreciate any answers or hints to where I can find more detailed information.
Thank you very much,
Tom
If I understand correctly, the same issue applies to land purchases. Does it make sense to arrange interim financing (a variable loan secured by a mortgage on the roof structure with a standard building permit as provided by the real estate agent), which would then be replaced by a fixed-rate mortgage for the land and construction once the new building permit and detailed plans are available?
H
HilfeHilfe17 Aug 2016 12:41Hello,
I don’t understand the problem. It’s like a purchase plus renovation. The purchase price is clear, plus the cost of the finishing work. I can’t say whether the banks will finance 100% of this.
Basically, I would recommend that you at least get a reliable cost estimate, not just a rough one, so you have some security. What if the architect underestimates the detailed planning by $30,000 and you already have financing in place?
It’s also a good idea to ask your main bank what documents they require for your project.
Good luck
I don’t understand the problem. It’s like a purchase plus renovation. The purchase price is clear, plus the cost of the finishing work. I can’t say whether the banks will finance 100% of this.
Basically, I would recommend that you at least get a reliable cost estimate, not just a rough one, so you have some security. What if the architect underestimates the detailed planning by $30,000 and you already have financing in place?
It’s also a good idea to ask your main bank what documents they require for your project.
Good luck