How much equity do you need when buying a house?

Why is equity important in real estate financing?

In order for future property owners to even receive a loan from the bank, it has become almost essential to bring the equity they have already saved into the financing. This means you will receive significantly better loan conditions from your bank and will be able to pay off the loan more quickly. Basically, the more equity you can bring into the financing.

The banks, in turn, want to minimize their risk in the event of a customer default by using existing capital. The amount of equity capital used when granting a loan has a significantly positive effect on the conditions. The advantages include, for example, interest rate reductions due to a low loan-to-value ratio or an initially lower repayment.

How much equity should you bring with you when buying a house?

The amount of equity depends largely on the purchase price of the property. The higher the purchase price of the property, the higher the additional purchase price costs or With a higher loan amount, the financing costs become more expensive overall.

A rule of thumb is always to assume that the future property owner has at least the amount of Additional purchase price costs such as costs for the broker, the real estate transfer tax, the notary or the land registry office itself should raise.

Here, a percentage of 20 to 30% is generally assumed, which should be available depending on the purchase price of the property.

The more, the better, of course, since the total costs for financing are not that high, you see Get better lending conditions and pay off your real estate loan more quickly progress.

What counts as equity in real estate financing?

The following own assets are included in the calculation as equity in real estate financing:

• Bank balances from current account/fixed-term deposit accounts, savings accounts, time deposits and savings plans
• Balances from building savings contracts if they are ready for allocation at the time the loan is granted
• Cash
• Securities
• Capital life and pension insurance

Before the bank can even grant a loan for your house purchase, you should definitely have your equity ready in advance. Fixed-term deposits or life insurance policies should therefore be canceled well in advance. The balance in the building savings contract should be ready for allocation before the money is needed to finance the property.

Basically, when deciding to buy a house, it is always advisable to calculate your current financial performance. To do this, you should have calculated your monthly financial resilience in advance by purchasing a property. Here, banks and independent financial service providers assume a maximum value of 40% of the monthly income as the repayment rate for the home loan.

Accordingly, you can more easily calculate your maximum budget, which you can use to search for a suitable property.

If you consider these tips in advance when looking for real estate and what you can use If you know your own capital, you should still receive good conditions for real estate financing can.