Equity as security for loans

What can be stated as equity?

The following lists provide an overview of what you can bring in as equity capital in discussions with the bank:

Equity that exists as an amount of money

  • available cash
  • Money that is available in bank accounts or on call money and fixed-term deposit accounts
  • Securities, e.g. funds or stocks
  • a home loan and savings contract ready for allocation
  • certain funding, e.g. from KfW programs
  • private loans from relatives or friends

Equity that serves as collateral

  • another property in your possession if it is as debt-free as possible
  • possibly the property on which you want to build a house - if you already own the property and now want to finance the building of the house
  • other valuables, for example expensive paintings or gold coins
  • Money saved from the Riester pension - according to the Eigenheimrentengesetz, this is possible
  • Life insurance (the surrender value in the case of endowment life insurance)

Equity that is provided as a personal contribution

  • own professional work (relatives and acquaintances can also help) - this “muscle mortgage” can make up up to 15% of the loan amount

When does a home loan and savings contract count as equity?

A home loan and savings contract can be brought into the home loan as equity capital when it is ready for allocation. This phase of home savings is reached when the minimum credit has been saved and the agreed minimum savings period has been completed. You can then decide whether to enter the entire amount saved as equity or just part of it. If the home loan and savings contract is not ready for allocation until later, you can take out bridging finance for the corresponding sum.

Does Baukindergeld count as equity for building finance?

No, Baukindergeld is not part of the equity. You can only apply for it once you have moved into the new house or apartment. In addition, the child benefit is not paid all at once, but spread over several years. It is also not tied to a specific use. However, you still have the option of using the Baukindergeld to finance the property. Either use the government grant for the monthly repayment of the loan or take the annual payment for a special repayment to get you out of debt faster.

Does an existing property count as equity?

Yes, a piece of land or a property counts as equity. It serves as security for the bank, which means that the terms of the mortgage loan improve. However, the property should not be encumbered with a land charge. If it has not yet been paid off or has already been deposited as security for another loan, it will be difficult to have this property counted as equity. There are also banks where a piece of land does not automatically count as equity. In most cases it is worthwhile to speak to several banks and to have the various provisions for dealing with equity explained to you.

The state supports the purchase, construction and modernization of residential property through inexpensive KfW loans of up to € 120,000 as well as repayment grants. You can find out how to get there from us.

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