New buildings are popular: finally no more immediate neighbors, your garden, and freedom to design the room layout. It is obvious that a new building is more complex than buying an existing property – but what about financing? What do you need to consider?
Plan your finances early
Before the final plans for the house are in place, they often change – and the financing must be adjusted accordingly. The best way to do this is to grow the loan solution with the construction project: The most important tip is to start early and talk to me as a building finance specialist right from the start. We would rather adapt the solution again and again and check whether the current status remains within the budget. That is better for everyone involved than starting from scratch at the very end, that is my advice.
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Finance the property variably
Another special feature of new construction: the plot of land is often bought separately from the house. It then has to be paid for before the plans for the property are finalized. Anyone who does not have enough equity for this will need a separate loan. It makes no sense to take out construction financing with a fixed interest rate just for the plot of land; a variable loan is better: this is more expensive than an annuity loan. But this gives builders the freedom to choose which bank they want to finance the house with later.
Keep an eye on commitment interest
If you buy a house, you usually need the entire amount at once. It’s different with new construction: the bill and payment are only made in the future – and gradually, for each construction phase. When choosing a bank, this means that it should not charge interest for as long as possible for holding money that has not yet been withdrawn. Many institutions offer a one-year interest-free period, others even up to 24 months. But be careful: here the overall package is sometimes no longer right because the basic terms may be more expensive. Only all cost components make up a good term, not just the interest.