Buy house without equity

Buy house without equity

The purchase or construction of a house is an investment in the low to mid six-digit euro area. When buying a home, the purchase price is largely determined by the value of the existing property. Added to this are the size and value of the property. The energetic overall condition of the house is also decisive. In any case, the house embodies a value that must be paid at the time of purchase. If no own savings can be made, an interested bank must be found for the so-called full financing.

Own contribution instead of equity capital

In the case of home financing, the revenue side is subdivided into the three areas of self-financing, own contribution and debt financing. With their own contribution, manual work, ie manpower, is addressed, which does not have to be outsourced, but can be done by oneself and on one's own initiative. These are mostly interior work that the professional home improvement not only qualified, but also very happy to perform himself. An own contribution can be calculated quite accurately.

The costs of craftsmen are determined on the basis of cost estimates. The expense of buying a home should be broken down into individual cost types against this background. What flows into the financing and is not awarded externally is considered own contribution. The house purchase financing is reduced by this total sum. A home buyer without equity brings in this case, no cash with; but the funding, ie the difference between income and expenditure, is reduced nevertheless.

Do not omit public subsidies

This point is mentioned more for the sake of completeness. Depending on the property being purchased, it should be examined for the sake of thoroughness alone whether public grants can be applied for. This can be the case, for example, with a listed property. Land or municipality offer one-off grants in the four-digit euro area for monument protection reasons, which are not refundable. This is not always and everywhere the case, but by no means excluded.

Such subsidies relate either to the purchase of the land or the listed building. If the conditions are right, such a grant would reduce the amount of funding. This would not be equity capital in the sense of mortgage lending, but nevertheless a creditable income, which reduces debt financing.

Term Life Insurance for Financing Assurance

Many lending institutions expect mortgages of up to thirty percent on mortgage lending. Their debt financing is therefore limited to about seventy percent, because in the case of a compulsory auction of the property their share of financing with high probability to get back uncut. The granted building loan can be secured by the entry of a mortgage in the land register. Thus, the credit default risk is limited in the event that the client does not fulfill the loan agreement during his lifetime.

In order to hedge this risk even in the event of death, especially in the case of full financing, ie with 100% debt financing, special risk coverage becomes valuable placed. The purpose of this is to provide a corresponding amount of term life insurance taken out at the same time as the loan was granted. It is supplemented by the insurance modules unemployment, accident, incapacity for work and incapacity and assigned directly to the bank upon conclusion. If one of these insured cases occurs, the insurance benefit is paid to the lender. In the case of the death of the homebuyer as policyholder, the mortgage lending will be completely replaced. The property is debt-free, the mortgage is canceled, and the survivors can keep their residence unchanged. The monthly insurance contributions must be included in the home purchase financing without equity.

Creditworthiness, long-term income, secure job

For the home purchase financing without equity, the permanently good credit rating is an indispensable prerequisite. It is the economic power to repay the loan on time and in full. In addition, a correspondingly high income is needed, and it must also be best guaranteed for the next one or two decades. Safety and warranty are two things these days. As a guarantee, the civil service may be termed for life.

The official in the upper or higher service has been confirmed in writing his appointment for life. This is a job guarantee that is considered as such even today. In the free economy there is no such guarantee. The employment contract is a contractual security, it secures the employment relationship. Contracts can be changed, either unilaterally or by mutual agreement, right through to dissolution. Company mergers or corporate insolvencies have a lasting effect on such job security without the contractor having any influence over it. At the time of the home purchase financing, its credit rating is good to very good, and the job is completely safe. Nevertheless, there is no guarantee that and how long that will remain.

Finance home purchase and save in parallel

Unless the home buyer is a lifetime civil servant, this certainly more theoretical situation can be mitigated by simultaneously saving the loan is returned. This is made possible by a clearly above-average net income within the family community. This is quite possible if, in addition to the homebuyer, one or more relatives of the household share income as the main earner. From the income of the main earner the house purchase financing is paid, while the pro rata income of the other co-earners is saved.

Including the risk life insurance, a home purchase without equity for both lender and borrower can be seen as safe and risk-free. The level and the security of the income of the co-earners are subject to similar conditions. A mini-job, with or without a contract, is not sufficient in terms of height or security. The situation is different for a spouse's half-day job as a teacher at the local elementary or secondary school. Even if this position is limited, the experience of recent years shows how secure or unimaginable a new position is in the coming school year.

Realistically assess the individual case

As in other or similar situations, the individual case must be evaluated here as well , The home buyer can assume that his house bank is very interested in mortgage lending. The loan interest is the merit of the business. The house bank will be happy to finance it if it can reduce its credit default risk to a minimum. The purpose of this is to examine the creditworthiness and the overall economic and private circumstances. The homebuyer, for his part, must know that the costs of financing are equivalent to the rent of a rented apartment. In addition, there are the operating or ancillary costs including the water consumption and the energy costs for electricity, hot water and heating. And finally, the monthly or quarterly payment for term life insurance is included. These are the costs of housing that will have to be paid out of the income of the main earner in the next one or two decades.

If that seems realistic and feasible, home equity financing without equity should be feasible and justifiable.

Artikelbild : © Goodluz / Shutterstock


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