Financing without equity: it's easy
The dream of owning a house with a garden has high priority, especially for families with small children. But often it fails because of the necessary equity. And there is often frustration and the dream a dream.
So much for the theory, because in times of low interest rates it makes sense to think about whether financing without equity is not possible. And quite a few banks are also willing to finance their customers' home purchases, even if they have little or no equity.
However, this type of real estate financing is linked to strict requirements and is far from advisable for every real estate buyer.
Because basically the formula is yes: as much equity as possible, as little borrowing as necessary. If someone has to finance his property purchase 100%, the monthly charge increases. This is no different even in times of low real estate interest rates. However, in the case of financing without equity, the repayment portion is then increased, which is also a prerequisite for banks to buyers. The reason is obvious: If there is an - unwanted - premature sale of the property during the first few years, part of the loan amount has already been paid off due to the higher repayment, and there is a risk that the sale price will be less than the loan amount that is still due , the loan cannot be completely redeemed, at least reduced.
The fact that home finance without equity capital still poses a risk to banks is demonstrated by the fact that such finance is only suitable for consumers who have a good to very good monthly income. Only then is it guaranteed that the financing with the significantly higher repayment can also be serviced regularly and, on the other hand, that the buyers also have a corresponding income to cover their everyday lives.
Because banks generally only provide construction finance if the total burden of this financing and any other current liabilities does not exceed 40% of the monthly net income. In addition, buyers should then also be able to build up corresponding reserves for the future. Because as the owner of a property you always have to count on repairs or they are simply necessary from time to time.