## Again: equity through credit?

However, the approval of the Astro’s financing requires a little more than just figure acrobatics. Keyword equity.

Basic mathematical knowledge is always helpful – especially when it comes to whether rents are sufficient to finance the construction of a house. Keyword equity. To calculate the amount of the annual rental costs, you only have to use the monthly cold rental periods 12.

In a first step, this amount must be divided by the interest at which the loan is granted. As a rule, an initial repayment rate of 1 to 2 percentage points is set. Most credit institutions usually set two percentage points for the minimum annual repayment.

The interest rate of two percentage points is currently granted by financial institutions for a period of fifteen years, in which borrowers can bring in comparatively little equity. In this case, the future owner would only have to raise \$ 150,000 in own funds plus incidental acquisition costs. The calculation of the affordable purchase price of a property, based on rental expenses, is now as follows:

But be careful – there can be high additional costs behind the relatively harmless by-product of the incidental acquisition costs – and they are often misjudged. Let us assume that a rent-tired person finds a suitable property in Vienna. The acquisition costs of the real estate amount to \$ 300,000; the incidental acquisition costs (similar to most federal states) would look as follows:

## Loan with all costs as equity

If the property is brokered by a real estate agent, sales tax can be raised from three percentage points of the sales price. If the house bank only grants the loan if the seeker has provided \$ 15,000 plus all costs as equity, the savings of our prospective buyers would have to be at least \$ 39,750 – which would probably have meant the end of some dream successes.

The possible lack of understanding for potential debtors is understandable: are the regular (high) rental costs not sufficient over many years to underpin your own financial potential? A house bank should thus be able to provide construction finance at least up to the amount of the rent.

A purchase shifts the risk potential that it would not have enough time for the repayment. In the worst case, the termination of the loan contract would result in the withdrawal of the house and would leave the previous owner with a stack of residual credit.

As the debtor’s risk of default increases, the discussions on financing take a back seat. A very individual listing of current income and expenses always makes sense. If it turns out that the liquid funds are not even sufficient to cover the ancillary acquisition costs, you can assume that you are working with reservations from the house bank. Another way to increase the lack of own funds can also be to levy property tax on the parents’ house.

At many banks, this is valued as equity. If you assign the policy to the house bank, in practice they count as much as the equity.