What does "Beleihungswert" mean?

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In summary, the German term "Beleihungswert," translated as lending value in English, represents an estimate of a property's resale value used by banks to determine the maximum loan amount. In the event of loan default, the bank would auction off the property, and the expected amount from this auction is the loan-to-value ratio.

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The lending value is generally calculated by subtracting securities from the market value, with the specific method varying based on the bank's policies. Typically, it involves a combination of three factors: material value, income value, and comparative value.

1. Material Value Calculation: The bank considers material costs for a new comparable property, deducting depreciation and other relevant expenses.

2. Income Value Assessment: This method involves evaluating the property's potential to increase in value, either through rental income or appreciation of the land itself.

3. Comparative Value Determination: The bank compares the property to similar ones in the area to establish its comparative value.

According to German law, the lending value cannot exceed the loan-to-value ratio, ensuring that there is a reasonable relationship between the loan amount and the property's market value at any given time.