The word post-financing is well known to many builders, even if it is not exactly positively connected. Anyone who builds their own home should avoid re-financing in any case, because it is usually associated with considerable additional costs. If you have to take out a loan again to implement your construction project and not risk a construction freeze, you have to expect significantly higher interest rates and usually dig deeper.
Why are the interest rates higher when refinancing?
Even if the post-financed amount is comparatively small compared to the originally concluded construction financing, this conclusion of the contract is just as expensive for the banks. As a rule, these costs are independent of the actual loan amount. In addition, there are the interest rates that are usually considerably higher in the case of refinancing.
This is due to the so-called subordination: Just like the first credit institution, the bank, where builders conclude additional financing, is entered as a creditor in the land register – but only subordinately. When it comes to the repayment of the loan, the debt is initially reduced to the financially registered lender. The bank that grants refinancing therefore has to wait longer for its money and therefore runs the risk of not or only partially getting back its money. The law of subordination also applies in the case of a forced auction – a risk that the banks can pay for themselves through very high interest rates.
What are the reasons for refinancing?
Refinancing is due when the construction costs blow up the first loan. On the one hand, this can happen due to unforeseen and unforeseen external circumstances – for example, if the excavation pit collapses or the weather causes damage to the building material. Even if the client outsources work that he actually wanted to take on to external service providers, this can result in unforeseen costs. Last but not least, errors in the calculation of financing requirements can also be a reason why additional financing is necessary.
In order to avoid re-financing and the associated considerable additional costs, builders should consider or consider certain points:
- Solid, seamless financial planning : Having your own house is not a project that should be implemented without thinking. A long planning and preparation phase with a meticulously accurate budget plan is essential if you want to avoid unpleasant financial surprises. A buffer of around three to five percent of the construction sum is advisable. If this money is not needed, it can be repaid under certain circumstances as part of a special repayment if this option is included in the loan contract.
- Taking out a loan with a reserve option: Some construction financing offers a so-called reserve option, which enables the building owner to finance a certain amount if necessary. At some banks, this sum is up to 20,000 dollars.
- Keep the budget in mind: Although the luxurious shower or the kitchen island with gas stove joy even increases at the house – owners should always keep in such decisions their loan amount in mind and to curb unplanned overspending.
- Be patient : Some projects can also be carried out well afterwards and do not necessarily have to be integrated into the construction process – for example, garden design. Expensive refinancing can often be avoided by postponing less urgent plans. Instead, homeowners can use an installment loan such as the so-called residential loan. This is earmarked and intended for repairs and repairs to your own property. There is no entry in the land register.
- Consider a private loan : Instead of accepting high interest rates, builders should find out whether friends or family can compensate for the financial deficit with a private loan.
Tips for refinancing
If refinancing is inevitable, borrowers have several options.
- In the case of a bank loan, it can be worthwhile to inquire at the same credit institution from which the current mortgage lending has already been completed. If the bank already has the mortgage on the property, it may underestimate the financial risk.
- Many construction companies also offer separate additional financing if necessary. In any case, it is advisable to compare the interest rate level with the usual banks before concluding the contract.
- On the other hand, free intermediaries of refinancing should be careful with building owners – there is a risk of fraud here.
In general, however, the following applies: If you plan carefully in advance and take financial reserves into account, you can usually avoid re-financing despite complications on the construction site.