Are house-building ideas realistic?

Hello forum, I have read quite a bit so far and now hope that you can also answer my specific questions. We (27+30, married + 2 small children) want to build a house quite soon. The plot of land of about 500-700m^2 will cost at least €100,000 + additional costs. For the house, we imagine something around 160m^2 + basement, a bit of extra features are also welcome - electric shutters, 2 full bathrooms, a nice kitchen, etc. Unfortunately, we cannot contribute much in terms of personal labor since our family lives a few hundred kilometers away and we do not want to be on the construction site all the time with the two little ones. Our situation: I am employed - about €3200 net, my wife currently on parental allowance + child benefit, afterwards a mini job planned which should contribute about €1000 --> €4200 per month trending upwards. No debts, about €30,000 in equity at the moment (+€1500/month), maybe a few thousand from VWL, Riester? Currently, we pay €750 cold rent. Is the project feasible? I roughly calculated a total of about €350k - will that be enough? Can we afford more if necessary? €1800/month interest + repayment should be doable. Best regards, roth

Hello Roth,

first of all I would say: Go to the LOCAL bank and get advice.

But, based on your information here in the forum, it already looks quite good. The total costs you quoted are something to work with. The calculation of the monthly burden can be shown as follows:

350 TEUR total costs
-30 ZEUR equity
320 TEUR to finance

A financing should work with 2% repayment, even if you initially choose a lower repayment rate. Let’s assume the current average interest rate, taking into account all KFW loans, is about 4.5% p.a.

320,000 x (4.5% interest + 1.5% repayment) / 12 = 1600 EUR p.m.

Even if you state you can pay 1800 EUR per month, I would initially leave it at 1600 EUR and possibly repay more later through special repayments or VERY IMPORTANT repayment rate changes. At least one of the partial loans in your financing should be able to do that.

My recommendation: Fix the rate for a long time! With the monthly payments your financing will probably run for 30 years and therefore you should secure the interest rate for a partial loan for 20 + X years!

So go to the bank and start planning quickly, interest rates are rising!

Regards

Hello,

with total costs of 350,000.00, a considerable part of your equity will be spent on additional costs. It won’t be a 100% financing, but you are not really far from it.
With your income, you will certainly get financing. Whether your installment is 1,600.00 or 1,800.00, with additional costs you will probably approach "50% for the roof over your head." If YOU as the main earner are unable to work, your wife will probably not be able to keep the house. Or does she have a claim to a well-paid full-time job?

Regards Ille1975

Hello,
thanks for your answers! That already helps.
@Ille1975, yes you're right, I shouldn't be out of work as the main earner, my wife could only contribute about €1500/month with a full-time job. However, I would describe my job as quite secure, not tenured but in a very large company.
The plan is to have around €50-60k in liquid funds by the middle of next year and then we'll get started. Then, I hope, I will also feel a bit more secure. Besides, I assume my salary will still increase somewhat in the next years.
One more question about the total price composition: I will probably get the plot developed for around €100k, how much may the house still cost if you deduct the basement, ancillary costs, construction electricity, etc. – are €180k + €40k basement + €30k other costs reasonably calculated or am I missing something?

One fundamental question at the end: Do you recommend lower repayment rates at first? And then increase them later and be able to put some money aside on the side? But then pay off over a longer period? Because right now I'm really pondering this.

Thanks for your help!

Good morning!

A basement for 40,000 EUR is quite well calculated. You shouldn't skimp on that, as it is very difficult to repair if there are defects. There are also bargain offers that will probably build it cheaper for you!

Additional costs 30,000 EUR. It depends on what is all included there. Construction power, builder’s liability insurance, etc. are for example included in my fixed-price contract. If you buy the land through your developer, a so-called "Uniform Contract" applies, and then land transfer tax is also due on your house. If you buy the land independently of that, you save a few thousand euros. Built-in kitchen, carport? You can inquire about the statutory and official additional costs in advance. For the rest, get some offers.

180,000 EUR for the house. The question is how much frills you want? It certainly makes sense to build a KFW70 house. This is subsidized by the Kfw with 50,000 EUR per residential unit. My Kfw70 house costs 157,000 EUR, but only 111 sqm, with underfloor heating, solar, etc. Without electric shutters, with only one fancy bathroom. With 180,000 EUR you are certainly not off track, the question is only whether all your frills are included.

You might want to consider starting your building project in 2011. The current subsidized KFW70 standard is supposed to become the normal standard in 2012, which every builder must meet. I don’t think it will still be subsidized so generously then. For the portion above 50,000 EUR, I got 3.6%. You can also fully load the loan with special repayments as you wish. With normal annuity loans, you usually have a 5% special repayment right per year and one or two repayment rate changes are also possible. So you are quite flexible regarding repayment. Just keep an eye on the interest rate level and then decide for yourself whether to repay or save. Start with 1% repayment. By the way, you can also give up to 30% of your construction costs to the KFW. The interest rate there is very good and partly offered cheaper via direct banks, but there they require more than 1% repayment. (KFW program 124, take that over 35 years, there you have a lower repayment).

You can also design a (manageable) part of your financing variable. If you are sure to earn the amount X alongside the financing, you can also have that amount variable interest. It’s cheaper, if interest rates go up you can repay that part at any time. There is an interest adjustment every three months there.

Riester? Actually a great thing. Mostly offered in the package - Riester home savings contract. (I find those things inflexible, expensive and well mostly unnecessary. I have already written myself partially sore here.) Google for Riester annuity loan. The government allowances there are special repayments and your repayment contributions up to the 4% limit are special expenses. Tax-wise very interesting for high incomes. But be aware of restrictions regarding the house. Tax liability in old age. Have a tax advisor run the numbers once.

Get offers for everything, be persistent in negotiations, the initial interest rate is usually a trial balloon, and decide with your family for which financing you can sleep most peacefully!

Best regards
Ille1975

Thank you for your detailed response ille1975! May I ask which company you are building with? Feel free to reply via PM.
Best regards roth