Which banks offer maximum financing

Full financing

Anyone who speaks of full home finance means building finance without equity. In this case, the bank will finance the entire purchase price plus additional costs, such as notary fees and fees for the entry in the land register. There are some banks that are doing it. However, only a few borrowers receive full financing for their house or condominium. The article by FINANZCHECK.de explains what builders need to pay attention to when it comes to full financing.

The most important things at a glance

  • Those who bear the ancillary acquisition costs with full financing themselves avoid the risk premium.

  • Full financing within a low interest rate phase can make more economic sense than financing with equity outside a low interest rate phase.

  • Very high income borrowers have better chances of full financing without equity.

What is full financing anyway?

Full financing does not only include the loan amount for the Buying or building a property, but also the additional building costs. This includes the following cost items:

  • Brokerage fee

  • Notary fees

  • Land registry fees

  • Real estate transfer tax

Advantages and disadvantages of full real estate financing

Advantages of mortgage lending without equityDisadvantages of mortgage lending without equity
High repayments are not uncommon, but the loan is repaid faster
Banks demand high repayments
In times of low interest rates, full financing can be more worthwhile than saving up equity
The terms of full financing are usually more expensive than those with equity
Full financing enables young families and single people to find their way into their own home
Only a few banks offer full financing
Banks that offer full financing are often experienced and can provide extensive advice

Calculation examples in direct comparison: full financing vs. financing with equity

The following calculation example shows when full financing can actually make sense. It is assumed that a condominium is bought for 150,000 euros. In addition, the interest rate level is very low in 2018, but will rise sharply until 2025 - this explains the higher effective interest rate.

Financial resourcesFull financing without equity, borrowing 2018, fictitious interest rate including risk surchargesFinancing with equity (EK), postponed by the savings phase for EK by 7 years to 2025, fictitious higher interest rate
Effective interest rate, fixed interest rate for 10 years

Evaluation of results: If the loan is designed as full financing in 2018, there will be a residual debt of 98,298 euros after the fixed interest period of 10 years - despite the interest premium. The loan taken out in 2025, on the other hand, is subject to higher interest rates. These consume the advantage of the saved equity of 15,000 euros. After the 10-year fixed interest period has expired, the remaining debt is 10,462 euros higher (108,760 euros). Full financing starting in 2018 has therefore proven to be the more economical option.

Why do banks charge interest surcharges for mortgage lending without equity capital?

Fully financed real estate loans represent a higher risk from the banks' point of view. As a rule, banks start calculating interest surcharges when the loan amount is more than 80 percent of the purchase or construction price. In the case of additional financing of the incidental acquisition costs, i.e. with the 110 percent financing, a risk premium is added, which depends on the economic circumstances, the property value and other personal framework conditions of the borrower.

This risk surcharge is made for a specific reason: If the bank finances the incidental acquisition costs, its commitment exceeds the value of the property. In the event of a foreclosure auction, the bank would be left with these costs. The risk premium protects the bank from the expected difference between the auction proceeds and the remaining debt on the loan.

Who will get full funding?

Banks select borrowers for full financing according to strict criteria. They are often based on the "40 percent rule". This states that borrowers are eligible if their monthly payments to repay the loan do not exceed 40 percent of the monthly income. If other loans are available, for example for the repayment of a car, motorcycle, vacation, furniture and other consumer goods, this installment will be taken into account. In practice, this means that all loans taken together may not exceed the 40 percent limit. This quota limits the maximum loan amount and at the same time means that candidates need a comparatively high income for full financing.

Example: For a house with full financing over 200,000 euros, an interest rate of 3 percent and an initial repayment of 3.5 percent, the monthly rate is 1,083 euros. This means that the monthly net income must be at least EUR 2,707.

Tip: If you want to finance a property, you should avoid consumer debt or taking out loans in advance.

Do banks expect high repayments?

Banks expect borrowers who seek mortgage lending without equity to make high repayments. In conjunction with the 40 percent rule, the repayment rate defines a further limit for the amount of the monthly installment. At its core is the bank's intention preferably to provide customers with full financing who have a high, stable income.

Do borrowers need to have excellent credit ratings?

The protection association for general credit protection (SCHUFA) plays an important role in granting full financing. In principle, the register must not have any negative entries.

The higher the score, the better the loan to fully finance the property. In addition to the score, other factors from the SCHUFA information also play a role. However, each bank applies its own standards and evaluates the information from the SCHUFA register according to its own rules.

What role do the location and equipment of the property play in full financing?

Real estate agents know that location plays the most important role in a property. This also applies to full financing. The reason is that the house or the condominium are the most important collateral for the bank. Properties in very good locations have significantly higher chances of full financing than properties in poor locations. Because properties in good locations are much easier to sell later - that is what interests the bank.

In addition, the equipment is important. A comfortably furnished apartment in a good location generates higher market demand than a simply furnished apartment. This is also a good argument from a banking perspective.

Full financing without equity capital - which bank should be considered?

There is no general rule as to which bank offers full real estate financing. In addition, banks can change their range of products at any time and remove or add full financing from their portfolio. The best way is to carry out the search using a construction loan calculator that allows the "full financing" option. There you enter the required data and you will receive an overview of all banks that are basically ready to support a home loan without equity.

Alternatively, it is worth asking your own house bank. She knows the financial circumstances of her customers. An important aspect is that the house bank is informed in detail about the stability of the income of its customers and can look back on a common history with the potential borrower of the full financing:

  • Have there already been loans that were regularly serviced in the past?

  • Does the customer often overdraw their account or do they always have enough money available?

  • What is the lifestyle like, what expenses does the customer have?

House banks can read the answers quite well based on the account movements. This affects the risk assessment.

6 tips for full financing

The following list provides an overview of the tips for full financing that have already been presented. In addition, it provides additional aspects that borrowers should consider in order to increase the chances of full financing of a property:

  1. Ensure that there are no debts in advance.

  2. For current loans, determine the rate of debts in relation to net income. Together with the planned loan, the quota must not exceed 40 percent.

  3. Check the SCHUFA information in advance and have any incorrect entries corrected. It is helpful to complete the information so that the bank can make a decision on the basis of comprehensive, valuable information.

  4. In the course of the application, transparency is required: Applicants should provide the bank with all the information they require and provide relevant information.

  5. Banks want to do business; they make good money from full financing. Borrowers are well advised to prepare as comprehensively as possible and to familiarize themselves with the terminology and how bank financing works. Informed borrowers give a serious, reliable impression, which means for the loan officer that the borrower has an overview of the consequences of a full financing.

  6. If possible, borrowers should finance the incidental acquisition costs themselves. This lowers the interest rate because there is no risk premium. In addition, the loan amount and thus the monthly charge decrease.