Muscle power – how to save money when building a property

Many prospective homebuyers are considering how to save money when purchasing real estate. Sweat equity – also known as a "sweat equity" mortgage – can be one option.

Banks often require a down payment of 20 to 30 percent. However, what many prospective homeowners don't know is that they can increase their down payment through sweat equity and thus improve their chances of securing financing. Many mortgage lenders allow homebuyers or builders to claim up to 10 to 15 percent of the purchase or construction cost as equity through sweat equity.

This can often lead to better loan terms and thus save several thousand euros in financing costs. However, it's important to consider that these cost savings usually come at the cost of increased time. Building or renovating a house can therefore be significantly extended. Thorough coordination of the schedule with architects and tradespeople is essential in this regard.

How far do your craftsmanship skills extend?

Before you present your planned contributions to the bank for construction or purchase, you should ensure that you can actually carry out the work. Lenders carefully examine what contributions a prospective buyer or builder can realistically make. For example, they often ask whether the DIY enthusiast already has experience with the intended task or whether they have enough time for it alongside their job.

However, the possibility of contributing your own labor does not depend solely on you. Support from friends, relatives, and acquaintances who agree to take on work on your property can also be counted as equity.

Don't forget workplace safety

Friends, relatives, and colleagues who help out on your construction site are not covered by statutory accident insurance in the event of an accident. To ensure basic accident protection, these helpers must be registered with the relevant employers' liability insurance association. For more comprehensive protection, they can also take out private construction helper insurance.

Leave the tricky jobs to the professionals

It is recommended that complex tasks such as structural work, roofing, and the installation of electrical, heating (gas/oil), and plumbing systems be carried out by professionals. Simpler tasks like painting, laying flooring, tiling the bathroom, or putting up a garden fence can be done yourself. Construction and financing experts advise leaving the core construction to specialists, while you can focus on interior design and exterior work.

How much is your own contribution worth?

Your building planner can provide you with a detailed breakdown of the various trades, including a breakdown of total costs into labor and material costs. Since lenders typically don't consider material costs, you can only submit the saved labor costs as a so-called "sweat equity" contribution to your lender for credit.

Are you looking for support with your property purchase? Contact us! We would be happy to advise you.

Notice

For the sake of readability, this text uses the generic masculine form. Female and other gender identities are explicitly included where relevant to the statement.

Legal notice: This article does not constitute tax or legal advice for any specific case. Please consult a lawyer and/or tax advisor to clarify the facts of your individual situation.

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