Credit purpose and own contribution. The purpose of loans for building a house is not only to cover the costs of building a house, but also all related investments, including land purchase, garage construction, plot fencing, utility costs. Most banks require the borrower to ensure a significant own contribution in financing these investments, amounting to 10-30%. The amount of own contribution is as shown in chapter II.4. – significant impact on the interest rate on the loan. It is worth noting that the concept of own contribution can be understood differently, some banks include, for example, the value of land2.
The size of home loans varies greatly. A significant proportion of borrowers build a house with an economic system, with a large amount of own work, financing work from own and family savings, which is why we meet loans lower than $ 100,000dollars. At the same time, however, loans for the purchase or construction of a house of over $ 600,000 are not uncommon. USD, and there are also loans exceeding $ 1 million.
With loans for the construction of houses, banks place particularly difficult documentation requirements; the potential customer must submit numerous certificates, statements etc. In addition to the documents listed when buying an apartment, among others, provide a valid building permit and decision on building and land development conditions , an excerpt and an excerpt from the land register, a cost estimate drawn up by the applicant, an excerpt from the land and mortgage register. If we are building a house with an economic system, banks often demand the presentation of a technical plan of the building, a certificate of non-compliance with property taxes, fire insurance policy and other random events.
Loans for house construction are usually paid in tranches. Construction of a house can take years, and the bank – as mentioned – pays the majority of money (70-90%, and in some cases – even 100% of the loan) directly to suppliers of goods and services related to construction. The borrower in some banks receives a certain amount (e.g. 10% of the loan capital) in cash. Together with own resources, it can therefore:
• cover costs for which there are no bills (the common practice of working in the black industry in the construction industry means that most of the construction costs must be borne in cash by the borrower, especially at the final stage of construction),
• cover the costs of numerous, usually small purchases, for which you must pay immediately (the seller does not want to wait for payment by the bank for the invoice issued),
• create a reserve for additional costs – most often they are revealed during construction.
House for a loan
The basic mass of money from a loan is paid by the bank by transfer to suppliers of goods and services after receiving invoices confirmed by the borrower. Any construction can be conventionally divided into stages, called tranches. If the construction is carried out by a rented enterprise or construction team, usually after the completion of each tranche3 financial settlement takes place and the bank transfers (at the request of the borrower) the appropriate sums to suppliers . The bank is interested in making the client realistically determine the construction cost and approximate amount of individual tranches, which is why he is asked by the bank to fill in the table showing the forecast payment distribution.
Remember that credit installments will be calculated in relation to the amount of money paid out within each tranche , also the loan period is counted from the moment of launching these tranches. As a result, the amount of loan installments changes enormously in the initial loan period (bank computers can easily cope with the necessary calculations).
The cost of building a house
Bank costs , including interest rate and credit commission, are usually set for the loan for house construction on the same terms as for the loan for the purchase of an apartment, while there are significant differences in non-bank costs borne by the borrower. Most non-bank costs are small and burdensome just because we have to bear them when we start investing. So the most expensive is real estate appraisal. The customer must also bear the expenditure of for: tax on civil law transactions , notary tax, application for court entry and stamp duty. In practice, the same fees must be paid when purchasing land. Most fees depend on the value of the property.
An additional cost for a home loan is the expenses associated with compulsory insurance of that house until a mortgage is established on it, and then – insuring it at all times when the loan is repaid.