This is the percentage of income you need for the home loan
The most important facts in brief
- If the loan installment amounts to a maximum of 35 percent of the salary, the construction financing is usually viable.
- Homebuyers who want to find out how much home they can afford, prepare a budget calculation and use the Baufi24 budget calculator.
- The general interest rate level as well as the credit rating influence the cost of real estate financing the most.
- While single earners with a solid, secure income have relatively good prospects of obtaining a home loan, banks expect low-income earners to provide additional loan collateral.
This is how you proceed
- Determine on the basis of the budget calculator and your income for construction financing, how high the purchase price of the home may be maximum.
- Choose the house or apartment of your dreams using our property search tool.
- Calculate your home loan with the construction financing calculator and let Baufi24 make you a customized offer.
In this guide:
- This is the role of income in construction financing
- How high must the salary be for a construction financing?
- How much real estate can I afford?
- What does the cost of a real estate loan depend on??
- Construction financing for single earners – this is what matters
- Low income and construction financing – can it work??
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This is the role income plays in construction financing
So that people without large fortunes can also fulfill the desire of own four walls, banks grant Real estate loans. With their help, the property can be purchased directly. To repay the home purchase financing, the borrower now transfers an installment every month. This you have to pay with your income. This includes, among other things:
- Salary/wage
- Income from self-employment
- Maintenance
- Child benefit
- Pension
- Rental income
If it is about the ability to pay, the income of central importance. Thus, monthly income should be sufficiently high to be able to repay the construction loan. Because of this, banks usually only extend real estate loans to people who have a fixed income for the construction financing. This is an important criterion for the bank when it has to assess the creditworthiness of the borrower.
Can you good salary If you have a good income for the construction financing, you can usually enjoy a further advantage. Because credit institutions regularly grant more favorable interest conditions to solvent borrowers. In this way, the cost of the real estate loan is reduced. A low income for construction financing, on the other hand, makes it more difficult to obtain. Furthermore, those who do not earn any income usually have no chance of obtaining home purchase financing.
How high must be the salary for a construction financing?
Income is particularly important for construction financing. But how high exactly must the income be, so that a house construction or purchase is feasible? There is no general answer to this question. However, in the past this Rule of thumb proven:
For the loan installment should home builders 35 percent at most of their net income.
To meet this requirement there are two adjusting screws: the income level and the rate. Thus, it is advantageous if prospective real estate buyers have a salary as high as possible or additional income. Who, on the other hand, earns a rather average income, pays particular attention to the loan rate. Its amount depends primarily on the amount borrowed.
So in order for you to be able to afford real estate financing, it makes sense to have a not too expensive house to purchase. Furthermore, the repayment rate as well as the granted debit interest rate have a direct effect on the rate.
To the above rule of thumb a brief example: a future homeowner earns every month 2.000 Euro net. The loan installment for the new house is 800 euros per month. Thus the rate 40 percent of the income. Such a low income for construction financing is not sufficient according to the rule.
The situation is different if the salary is 2.500 Euro net monthly lies. Then with 32 percent less than 35 percent of income needed to pay the loan installment.
How much real estate can I afford?
The amount of the loan installment depends largely on the loan amount required. This in turn turns out the larger, the more the home costs. This leads to the question: How much property can I afford with my income?? A quick answer on it gives the budget calculator of Baufi24. For a reliable result, the tool needs this information:
- Federal state in which property is located
- Equity
- possible installment
- Debit interest rate
- Debit interest per year
- Repayment in percent
To determine the equity prospective home buyers calculate their Savings together, which they can use for the purchase of real estate. Beside bank assets among other things also securities, allotment-ripe building loan contracts as well as private credits count to the own means.
Tip on equity
The Baufi24 experts advise house builders to cover at least 20 percent of the purchase price with their own capital. This increases the chances of getting a loan commitment and better construction interest rates.
Income for construction financing: Make a budget calculation
Furthermore, it is important to clarify how much salary is available for the construction financing. This has a direct effect on the indication of the possible rate in the budget calculator. In order to be able to give there a realistic figure, put credit prospective customers an Budget calculation on. This is an overview of all monthly income and expenses. To prepare simply list all the income that you regularly receive. This includes in particular:
- Wages and salaries
- Interest and dividends
- Maintenance
- Child benefit
- Pension
- Rental income
On the other hand you note all monthly expenses. Costs that do not occur every month are to be considered proportionally in this case. Expenses include, for example, expenses for:
- food and drink
- Car and public transport
- Leisure activities
- phone, smartphone and internet
- Insurances
The current rental costs are not to be included in the expenses. Because this item will no longer apply to homeowners in the future.
Budget calculator provides information on the highest possible purchase price
In the next step, you subtract the expenses from the income for the construction financing. The calculated difference can now be calculated as possible rate in the budget calculator. In addition, you can use the default settings for fixed interest rate, borrowing rate and repayment, or adjust them individually. By clicking on Calculate now the tool calculates how expensive the new home can be at most. Specifically, the budget calculator outputs, among other things:
- maximum loan
- Budget for real estate purchase
- maximum purchase price of the property
With this information and your salary for construction financing, you now embark on a search for a home that is within the personal budget is.
What do the costs of a real estate loan depend on??
Every home purchase financing is associated with expenses for borrowers. The amount of which is based on the bank’s granted Debit interest. This is influenced by both external and individual factors. Currently, mortgage interest rates remain at a historically low level due to the low interest rate policy – a good prerequisite for attractive debit interest rates.
In order for you to benefit from low costs on your real estate loan, however, you must meet some conditions. The income plays a central role in construction financing. Because this represents for the lender a substantial criterion, in order the Creditworthiness of the house builder to be able to determine. Within this framework, the bank also evaluates:
- Living conditions
- Existing equity capital
- Level of expenses and payment obligations
- Schufa score
If this check is positive, homebuyers can usually look forward to better mortgage rates. Furthermore, credit institutions welcome it if you are many savings bring into the real estate financing. In addition to a good salary for construction financing, other collateral can also have a favorable effect on the costs.
For example, it is possible that an additional borrower signs the loan agreement. If this or this has a fixed salary, then this reduces the risk of a loan default for the bank. In return, it often grants lower construction interest rates. If you want to reduce the cost of your real estate loan, pay attention to the Loan-to-value ratio. It is defined as follows:
Loan amount / mortgage lending value x 100
Here, the lower the loan-to-value ratio, the better. To achieve this, the loan amount must be as low as possible and the mortgage lending value as high as possible. If this is the case, you will usually be able to benefit from a more favorable real estate financing.
Construction financing for single earners – this is what counts
In many cases, two people purchase and finance a property together. This can be particularly reasonable for couples where both have a paid job. In this way, the financial burden of the construction loan can be distributed. In principle, however also possible, to build or buy a house as a single earner.
Then, however, the bank looks closely at the income available for construction financing. If only you earn a salary, this must be sufficiently high. The loan installment should not exceed 35 percent of the monthly net income. Especially in the case of single earners, however, the lender pays attention not only to the amount of the salary. The Reliability of income is at least as important here.
Are you a civil servant or in the public service for an indefinite period of time? Such borrowers convince with very reliable incomes. In particular for single earners this is a clear plus point. Who, on the other hand, his income for the construction financing from a self-employed activity, it has more difficult. Because the income of non-employees fluctuates more strongly. In this case, banks often require single earners to other loan collateral. Examples of possible options are:
- additional equity (more than 20 percent of the purchase amount)
- second borrower with income
- already paid off home
In addition, single earners should consider taking out occupational disability and residual debt insurance to conclude. If they later become unemployed, for example, then the insurance takes over the payment of the agreed loan installments. Borrowers who only have a low income for their construction financing can effectively protect their dependents from financial overload with such coverage.
Tip for repayment
To keep the cost of home purchase financing low, single earners with less financial leeway rely on a sufficiently high repayment rate. Here, a repayment rate of 2 percent is the lower limit.
Low income and construction financing – can it work??
In principle, banks prefer borrowers who have a secure, high income and no debts whatsoever. Nevertheless, it is also possible for interested parties with low incomes to obtain construction financing. However, in such a scenario, they must provide the lender with additional securities provide. Conceivably:
- second borrower
- Contribution of own contributions
- debt-free apartment
- Life insurance
If the installment for the construction loan exceeds 35 percent of the monthly income, then you have to convince the bank that you can still repay the real estate financing without any problems. Helpful for this is for example another borrower or a other borrower. If, for example, the spouse or a close relative earns a fixed income, he or she can co-sign the loan agreement. If the first borrower is no longer able to service the home loan at a later date, the second contracting party takes over the payments.
A low income and a construction financing do not exclude themselves under certain circumstances, even if a Muscle mortgage is brought in. Under this are own contributions from the builder. You reduce the required loan amount, which makes a loan more likely to be granted. Moreover, many banks count own contributions towards equity capital.
For low-income earners who already have a paid off property own, the chances of a construction loan are also good. For this you deposit the debt-free dwelling as security for the new house purchase financing. If you have paid into a life insurance policy for a number of years? Banks also recognize such a policy as collateral.
Whether the additional safeguards for a Lending is sufficient, depends generally on the respective bank. The Baufi24 team will inform you at any time on the subject of low income and construction financing. If you would like to find out whether your income is high enough to qualify for construction financing, make a non-binding and free appointment with our professional advisors now. It finds gladly from more than 450 offerers the one for you optimal house loan.
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