480,000 loan too high, experiences?

Hello

for house + land we need approx. 700,000 EUR (all-in). Equity available: 230,000 EUR of which a max. of 190,000 EUR should be used.

We can get 480,000 at 1.85% for 10 years. 1% repayment and at least 12,000 EUR p.a. special repayment.

Everyone tells me: No problem...do it! Interest rates are super low...everything great

I think: Better save for another 2 to 3 years

BUT: Will the interest rates stay like this or fall further? Will construction costs rise? Many unknowns..

A few experiences would interest me.

Whether it is too much can only be judged based on the income. Basically, with a 10-year fixed interest period and only 1% repayment, not much of the loan is paid off by the end of the term. And what if the interest rates are double or even higher then? They will not fall anymore, at least not enough to make a difference. And over the long term, they were rather around 6%...

Something is missing in your calculation if a maximum of 190 T€ equity is to be used.

We have a loan of a similar size, but for 20 years and a full repayment loan, i.e., everything paid off at the end, with special repayments accordingly earlier.

Personally, it was too uncertain for me to need a new financing after 10 years and not know where the interest rates would stand. Inflation only has to pick up a bit, and suddenly the interest rates are 1-3% higher.

The main problem with your figures above is the repayment. I wouldn’t go below 3% there; how long do you want to repay the loan?

Daves

I just wanted to point out that it is not entirely unlikely that they will rise again. Since I cannot see into the future either, of course I don’t know what will happen. What one wants to bet on is up to each individual.

But do you always have to pull out an unrealistic worst-case scenario for that?

It’s unfair like: Can I buy a Golf GTI with a top speed of 280 km/h? And the answer is: Sure, you can, but remember that a tire can also burst.

It’s kind of like coming around the corner with 6% interest.

What is missing from the calculation? My income fluctuates between 50,000 and 150,000 gross p.a. due to self-employment. The last few years were good... but what does that really mean? Let’s leave aside my wife’s income (part-time). My goal is also full repayment within 20 years. With an average assumed interest rate of 3%, that would be 2,700 EUR per month. The last 8 years would have made that possible. If things go badly... it is payable... but the term naturally explodes. If things go better... we will be done in 15 or 10 years. As a self-employed person, I have NO planning security... no matter how I calculate. You would have to be a civil servant.

I continue to tend towards saving... but everyone advises against it. Apart from that, we still see 1.5% over 10 years. I bet! Probably even less. There is definitely room to move downwards with a good equity ratio.

190 K€ plus 480 K€ is not 700 K€

On the topic of waiting: I built when it was optimal professionally and family-wise. Choosing the timing because of apparently favorable interest rates is nonsensical, even though many act that way – and many have to sell again because of jobs, etc.

The volatility is a bit high. With 50 K€ gross you have no chance, with something over 100 K€ it can work. I have a rate around 2300€/month with about 6,000 net. With two kids.

I am permanently employed, but the thing with special repayments is tricky: so far we have preferred to invest in furniture or vacations, but it's slowly getting better, so next year we will probably make special repayments. What I mean is: don’t overestimate it, in the beginning there are so many extras, we hadn’t even considered that.

Daves