Basic topic house construction/planning information funding

Hello everyone,

I have introduced myself briefly before, but I will write a bit more about my topic:

My wife and I (26 and 27 years old) have slowly started thinking about the topic of buying a house. The primary issue, of course, is --> equity capital! We plan to save as much as possible because we need it for financing. However, not everything should be spent on incidental costs but rather on interior furnishings and "wishes."

Now we don't know how to proceed! Where should we get information about funding? Would there even be anything available for us? How could we save best? Are there any tips or other advice? Is a building savings contract possibly still worthwhile now?

All in all, we want to be well prepared or prepared for many (hard to cover all) eventualities, even before purchasing the land! Regarding the land, it should be said that if we find a suitable one, then we would start!!! The motto is therefore not to proceed at all costs but to act wisely!!!

Now we have a small problem or rather the only wish we have!!!

We still live in my parents' three-family house. The house is almost fully paid off! My mother no longer works, as my father is severely disabled, and she takes care of him! We have talked with my parents many times, specifically about the topic of gifting! However, they said that if they gave us the house, they would wish for us to build a small bungalow for them in our name. They have their own savings, etc., but they wouldn't be able to get a loan financed since they don't have a full income.

Would there be any possibilities to support my parents without it becoming a disadvantage? I hope you understand what I mean....... Also, the topic of funding would be very interesting!

Regarding building, my godfather assured us that if we should ever build somehow or sometime (also regarding the parents), he would stand by us! --> this is a larger construction company, and it would basically be included under the topic of self-labor?!?!

I hope I was able to describe the situation a bit, and I am really looking forward to great tips and suggestions!!!!

Best regards

I think you need to break the whole thing down a bit more: Your parents have a three-family house, they live there, you do, and who else? Is the third living unit rented out or does another family member live there? When you say the house is almost paid off, what does that mean? How much is still outstanding? Would you pay off the remaining loan after a gift transfer, or would the parents do that beforehand? In that case, would you continue to live there or not? If not, in the worst case you would have a loan for your house and another one for your parents' bungalow? Would the parents basically stay living in their house, i.e. would a lifelong right of residence for them be an option or do they want to move out? So, the question is actually: Do you want to build so and so, or would you stay in your parents' house in the event of a gift?

Equity is always good, the more the better. Since we have no further information about your financial situation here, it is difficult to advise you. A corresponding income is of course important to be able to pay the installments. Are your jobs permanent? What about family planning? You should primarily focus on that first. How can you save equity? At the moment, interest rates on deposits are poor; probably the best option currently is a daily allowance account where you can always access your savings. Whether a building savings contract is still worthwhile is hard to say? When do you want to build? If in the next few years, it probably doesn't help much, because first, it will be hard to get an allocation by then and second, although loan interest rates are usually quite good, given the current low-interest phase, it is rarely really worthwhile. In addition, the interest on deposits here is usually appallingly low.

What do you mean by subsidies? Subsidies in the sense of L-Bank loans (I think Baden-Württemberg). Whether there is anything for your federal state and if so, what requirements you have to meet, I don't know. Maybe others know that, otherwise Aunt Google will surely help. Otherwise, there are KFW loans for building a house. Best to check their website.

Topic own contribution: Do you want to build yourself, i.e. with your godfather, or will he support you in the sense that you let his construction company build and maybe get some financial discounts? In the first case, you can of course declare your own contribution, but keep in mind that as a non-professional (which I assume you are) you will spend much more time and nerves than a professional. But of course, material still has to be bought, and that costs money. And whether your relatives always have time and work for free is also more than questionable. In the second case, you might come out a bit cheaper, but of course, you cannot declare your own contribution then.

Otherwise, I think it’s good that you don’t want to stress yourselves. Take your time looking for a plot and then find a competent planner who will design a house according to your ideas.

Hey Bauherren 2014,

first of all, thank you for your response! I’m glad that you can quickly get an answer or help here in order to get a better response.

So now to the questions (which I will answer according to the text):

- My parents have a 3-family house, where my parents live on the ground floor, my wife and I live on the first floor (also renting, to help my parents in the current situation) and two young female students live in the attic.

- According to my parents, the house should be completely paid off in 2 years. I would have to check the exact amount again. However, my parents also received a new interest rate from the house bank this year and therefore pay significantly less than before, and still everything ends in 2 years (about 2.5% interest). But according to my father, it shouldn’t be much more. I recall it being under 30K. --> We would also make special payments if it works out!

- If we were to build the house for my parents, they would continue to pay the remaining loan and we would take over the small house for them. Provided everything works out legally.

- So the idea was not to build both houses at the same time. Priority would initially be my parents’ house, since they would be building barrier-free! As I said, we would try to save more equity in order to get as far as possible. So also for that reason alone we would continue living there! However, the current house doesn’t help us with financing through rental income?

- We want to build anyway! However, timing would have to be figured out how it would all work. But as mentioned above, if it proves possible, my parents’ house has priority. But all this is just initial thoughts and I never know if it will work out as hoped!

- Financial situation looks like this: I am still the sole earner (about €2500-3000 net), my wife is a master’s student (about 1 more year). Minus rent, car, etc., I have a remaining monthly budget of about €1700. Job is permanent. Family planning is also expected, currently difficult though, but children are definitely planned.

- I have also thought about a savings account. But you just have to see. We simply want to save as much as possible. We plan to build in about 3 years, provided the right plot of land is found. If we find it earlier, we’ll see how we handle that.

- Regarding funding: I don’t necessarily mean KfW. This topic is already clear to me. I am talking, for example, about WfA funds (NRW.Bank) or other funds (I still have to inform myself extensively about this topic). Another funding topic concerns my father, as we would be building barrier-free for him. What options are there or are there any special funding programs at all?

- Personal contribution: My godfather and his sons would basically build with me. He had already explained this to me once, but we would have to discuss it again. Basically "I" build it and they will "help" me. I wouldn’t have them work for free, just somehow differently :D

I hope I was able to provide more information than in the initial post! :)

Ok, at least now you have a bit of understanding of the connections.

However, I can't help you with all the questions. Surely, it is important that your wife first finds a secure, permanent job after her Master's degree. As mentioned, don't neglect the topic of children, especially since during parental leave and possibly afterwards (in case of part-time work) a large part of your wife's income will be lost and you will have higher costs.

However, I see a problem if you first want to pay off the bungalow for your parents. Depending on how big it will be and what a plot of land costs, several hundred thousand euros will add up, and a barrier-free house certainly won't come for €2.50. Therefore, at the moment I don't see that you (if the arrangement with the gift will be like that) will be able to build it within 3 years. You can certainly use rental income for financing, but the question is always how much of the rent remains after deducting all costs and taxes, and you should always keep in mind that the rent can also fail at times. Additionally, an important point is that the "old" house (by which I mean your parents' house) will also need to be renovated/refurbished at some point, so money will need to be available for that as well. In principle, it would be possible (if the house belongs to you) to use the house as collateral for the financing of your own four walls, which should bring a lower interest rate, but you should be aware of the risks that in case of emergency this house could be liquidated if you cannot pay your loan anymore. Whether one wants to take this risk is up to oneself.

Unfortunately, I can't help you with the funding programs. Maybe someone else will find something there.

Regarding building with your own effort: Please be aware of what that causes in terms of time, nerves, and costs. It's not as simple as just saying: I'm just going to build now. As a layperson and alongside work you will take forever, you should be aware of that. If you also have small children at home that you want to see sometimes, it will be even more difficult. We ourselves have a neighbor who built his house himself or is still doing so. He and the whole family come from the construction industry, so they know what they're doing. He has been building with family and friends now for over a year after work (it is not a regular 9-to-5 job where he can just drop the pencil after 8 hours), every weekend and every vacation, and now says he would never do it again. It burdens you, your relationship, and family and you leave an incredible amount of strength in it. Anyone who builds their house themselves has my utmost respect, but it is not as simple as some imagine, so one should really think about it carefully.