Many people want to fulfill their dream of owning their own home, which is understandable, since their own four walls have many advantages. However, the realization of this project is associated with some costs, which you do not just casually. Therefore, this step should be well considered and planned right from the beginning, because if the purchase or construction of a property is financed by a bank, there are some important things to keep in mind. I have some interesting questions that can help you plan your funding.
How high should the equity be?
As a rule, this is referred to as 20 to 30% equity. For example, if the total value of the property is 200,000 euros, then you should already have 40,000 to 60,000 euros. Why is equity so important? The property is not 100% financed by the bank’s equity, but only 70 to 80%. The more equity capital can be raised, the better that of course. Another advantage is the lower financing costs and the significantly shorter duration. It makes a big difference if you pay for a property in 25 years or in 15 years. In the meantime, there are also some offers from the banks, which offer a full financing, who considers such, should consider this project well in advance, on faz.net I came across this topic on an interesting article.
Is the property affordable for me?
Before looking for a suitable financing, you should first get a precise overview of how expensive ultimately the property will be. If you know the exact need for financing, you can get first offers from the banks, they calculate the appropriate financing on the basis of your financial opportunity. It is important in the calculation to make sure that there is still sufficient financial scope remains possible for you. On moneypark.ch I came across a useful calculator, with which the feasibility of the mortgage can be calculated very easily. Although the calculation is based on the Swiss franc, it should not be a problem to convert the information into euros.
What to do if the financing is just as feasible?
Although at first the joy should certainly outweigh, because you can fulfill the dream of home ownership and theoretically affordable, you should remain realistic and put the emotions aside for a moment. Why? The own property can, if the financing is just so possible, thus become a financial burden and this over several decades. Ultimately, you only work for your home and for other things there is hardly any money left.
What to do? One way would be to lower the cost of the property. When buying a house, the option is in the room, whether it must necessarily be this object for this price. It may be worthwhile to wait a while and look for more houses.
If you want to build a house, think about your claims. Do you really need a living space of 150 m² or not 120 m²? Are two garages really necessary? You can ask yourself such and other questions. Realistically consider the requirements that the property should fulfill and think about it for another 20 or 30 years. Alone, this approach can reduce spending on the house by tens of thousands of dollars.
Furthermore, you can also think about a lease purchase.
Will there be more costs for me?
Yes. There are more costs for you, but these will only be due in the coming years. Always consider when buying a property, that also various maintenance measures are required. Even if you want to build a new house, it will not be up to date after 20 or 30 years, so you’ve been forced to spend money on a regular basis.
While minor improvements to the house are readily feasible, major repairs such as to the roof, the heating system or insulation can cost a lot of money, and so it is very important to finance a property that there is still enough financial leeway to cover this expenditure can.
Summary – Useful questions about financing a home
An accurate calculation of the financing costs of the property is very important. When buying a property always think of the maintenance costs. If affordability is just as feasible, think well about whether you want to finance the property at this level or whether it is not better to cut costs.