Financing options for build-out homes

Person carries a home

Manufactured homes offer builders with handyman skills a good opportunity for affordable home ownership. This is because, unlike conventional construction, these are prefabricated homes where you, the owner, are responsible for all or part of the interior finishes. This makes the financing requirement much less than other construction projects. Still, it usually doesn't work without credit.

Indispensable – equity capital

However, adequate equity capital should also not be dispensed with. Equity capital reduces the financing risks of a building project, since it is available for an unlimited period and no interest and repayment obligations arise. Experts recommend an equity share of at least 20 to 30 percent for house financing. Many banks also count on this. With development houses the furnished own contribution can be credited as replacement for missing own capital funds. Therefore less own means are necessary here than otherwise usual.

Classic – the building savings contract

A classic construction financing product that combines equity and loans is the building savings contract. In doing so, capital is systematically built up through regular savings. In addition, a low-interest loan can be used when the contract is ready for allocation. The conditions are already fixed when the contract is signed. Building savings contracts are therefore reliable in terms of calculation and form a solid financing building block. State subsidies can also make them attractive from a yield perspective.

Favorable – subsidies

Private housing construction is supported by public subsidy programs. On federal level there are programs of the credit institute for reconstruction (KfW) for this purpose. They are often supplemented or expanded by the states' own programs. Partly also municipal promotion measures exist. The KfW programs offer builders low-interest loans with further advantageous conditions. The application usually goes through the house bank. This also applies to the loan-supported country programs. Subsidies are sometimes granted, especially for municipal measures. They are particularly attractive because they do not have to be repaid and therefore act like equity capital.

With a bank – mortgage loan

Another common form of construction financing are mortgage loans from a bank. These are long-term loans secured by mortgages that are repaid in regular installments. Often also by annuity loan is spoken. The choice of term can influence the installment burden. Mortgage loans usually have a longer fixed-interest period, while the interest rate is fixed. After expiry of the fixed-interest period, follow-up financing takes place at the market conditions applicable at that time.

Often advantageous – direct provider

Due to the extraordinarily low interest rates at present as long-term as possible interest agreements are recommended. Nevertheless, an interest comparison of different providers is worthwhile. Because the range of conditions on the market is large. For mortgage loans, too, online financing via direct providers such as Volkswagen Bank (see is now common practice. They are often more favorable than conventional bank financing.

Indispensable – exact planning

The financing should be planned well in any case. Put your development house on a secure financial footing from the outset. Plan above all your own contributions and your financial load capacity realistically. Risk buffers should also be taken into account. Then you can concentrate fully on your development with peace of mind.

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