€420,000 budget for a house including land in northern Brandenburg

Hello,

I am about to sell my old house to build a new one, but I keep hesitating whether the calculation for the new house is actually realistic or if it would be better to stay in the old house.

Briefly about the overall situation: There are already two purchase offers for the old house. The old house is actually much too large for one person (340 sqm, currently 170 sqm developed plus 100 sqm basement), plus a plot of 2300 sqm. However, my main problem is the long commute to work (I live in northern Brandenburg and drive every day to work in the south of Berlin, 3-4 hours round trip). The house is a former granary with about 80 cm thick fieldstone walls on the ground floor. I have renovated the old house over the past ten years, among other things converting the old cardboard roof into a tiled roof with external insulation, insulating the upper floor from the outside, installing triple-glazed windows, renewing all water and sewage pipes as well as radiators, partially renewing the electrical system. In addition, a lot of dismantling, exposing old beam ceilings and walls, etc. All with a structural engineer and an energy consultant. The rest of the electrical system still needs to be renovated and I will eventually need two new nice bathrooms, plus part of the walls and ceilings would still have to be renovated. I estimate that I would have to invest another €100,000 plus a lot of personal effort (of course, more is always possible).

Due to my professional situation, I will most likely be working somewhere in central Berlin until retirement.

I have been thinking for some time, because of the long commuting times, about selling the old house and instead building a small new one closer to Berlin. Currently, I have an offer from a solid house provider (Town & Country house approx. 112 sqm) as well as a plot (600 sqm, Barnim district) for which I would pay a total of €420,000 including all incidental costs plus personal contributions (floor coverings and painting/wallpapering as well as garden, etc.). I have already viewed the plot and the train connection would be within walking distance, improving my commute time by about 40-50 minutes per day, so not impressive. I do not need luxury in the house, but rather predictability and the certainty that everything is finished at first and that I do not have to drive another half hour by car from the station to home in the evenings.

However, I am uncertain whether the financing and the whole undertaking really make sense, especially after reading various things here about financing:

I would build the house alone. My net salary is €3,500, I am 45 years old. I would only bring in about €30,000 equity plus personal contributions worth €16,000. The offered installment is €1,100, 2% repayment, interest about 1.59%, 20 years fixed interest. After 20 years, when I retire, around €200,000 would still be outstanding. It is not important to me that the house is paid off by retirement, but that I invest what I would have to spend on an apartment in Berlin (I estimate about €1,200 warm) into property. I expect monthly additional costs for the house of about €400 (currently I pay about €350 for the much larger house). It would be important to me that when I retire I do not run the risk of losing the house because of too high installments, but have an installment I can still afford with a pension (statutory plus supplementary pensions) of—for now I calculate rather conservatively—about €2,500. And I also do not know whether at the age of 65 I would even still get a follow-up financing in 20 years.

Is the sum set for the house including the plot really realistic? The incidental construction costs are planned at €58,000, the house at €210,000, plot including development, notary, broker, building savings introduction, utility connections €154,000.

I don't quite understand one thing. You are selling your old house, right? So you can pay off part of the new one and reduce your loan. Or does the purchase price go towards the outstanding balance with the bank?

The danger with a €200,000 outstanding balance is that interest rates might rise and thus probably the installment as well. Currently, the KFW loan has an interest rate of 0.95%. Have you already thought about/incorporated that?

I don’t quite understand one thing. You’re selling your old house. So you can pay off part of the new one and reduce your loan. Or does the purchase price for the remaining debt at the bank go towards that?

The risk with a remaining debt of €200,000 is that the interest rates rise and thus probably the installment as well. At the moment there is a 0.95% interest rate on the KfW loan. Have you already thought about/calculated that?

Yes, I’m only pulling about €30,000 equity from the sale; the rest goes towards the remaining debt and the prepayment penalty.

I asked the financial advisor about KfW, but he said the requirements regarding the house and insulation are even higher, so I would have to invest more. But I’m not sure if he just didn’t want to deal with it for whatever reason (too complicated or too low a commission?).

yes, I am only withdrawing about €30,000 equity from the sale, the rest goes towards the outstanding debt and the prepayment penalty.

I asked the financing advisor about KfW, but he said the requirements regarding the house and insulation are even higher, so I would have to invest more. However, I am not sure if he simply didn’t want to pursue it for whatever reason (too complicated or too low brokerage commission?)

By the way, I live 50 km south of Berlin. So we are almost neighbors. We also want to build within the next two years and are already preparing our plot accordingly.

But back to you. 1. Ask several financing advisors. 2. Yes, you would have to finance more, but that would a) have a positive effect on ancillary costs and b) on the interest rates. Therefore, the question would be whether it would not be cheaper in the end. 3. Have you already talked to the bank about possibly doing something regarding the prepayment penalty if you finance again through the bank? Maybe there is something possible? 4. How long is your old loan still running before you can pay it off completely? Could you not, for example, sublet it for that time or conclude some kind of rent-to-own agreement?

yes, I am only withdrawing about €30,000 of equity from the sale, the rest goes towards the outstanding debt and the prepayment penalty.

I asked the financing advisor about KfW, but he said the requirements regarding the house and insulation are even higher, so I would have to invest more. However, I’m not sure if he just didn’t want to deal with it for some reason (too much effort or too little brokerage commission?)

oh... that would hurt me so much given all the personal effort you put in....

I find it hard to give you any advice. However, I notice that you reduce the travel time from 3-4 hours to 2-3 hours, but have many times more debt.

That wouldn’t be for me

If you work in the center of Berlin, take a look at the route towards Beelitz-Heilstätten. I live in Beelitz and travel from Beelitz-Heilstätten by train (runs once an hour, but is supposed to be expanded to run every 30 minutes) to Berlin center (Alex, Hauptbahnhof) about 40-50 minutes (without changing trains). In the Beelitz area, there are quite a few plots offered by Town & Country including a house, of course. Otherwise, the price for the plot at about 120 per sqm is still okay.