Building a house without equity

Hello,

I became aware of this forum through Google and I hope to get an honest third opinion here.

My wife and I have been searching for an apartment in Berlin for some time. The market is swept clean. At some point, the thought occurred to us: 1000 euros in rent, I might as well buy a house. But even there, existing properties are far too expensive. So a new build, even though we never wanted this stress. I met with various well-known home builders you find on the internet, but I didn't like any of them; there were always unpredictable costs that nobody really knew about. But now, through a colleague at work, I came across a company that we like very much and builds in Brandenburg, so much that we have already met with them three times, the plot of land is a dream. Right at the Berlin city border, within walking distance to the S-Bahn, schools, daycare, shopping facilities, everything you need. We are now at the point where we can't decide whether to take the risk. I deliberately call it a risk because that's how we see it. Therefore, I would like to ask for your honest, unbiased third opinion. The financiers say it’s doable, the seller definitely says it’s doable, but what do you say? Are these sales figures even realistic, what costs might still arise that we haven't thought of? Here are the raw numbers:

Plot of land 550 sqm 80,000 euros
Flat rate 20,000 euros for:
Construction water and power, including consumption
Remaining surveying costs
House connection costs for sewage, water, electricity
Including costs of the structural engineer
Including costs of the soil report
Including costs of the official site plan
Including acceptance costs of the shell by the structural engineer
Including costs of the building permit

110 sqm house including painting and special features such as electric shutters, clay roof tiles, additional electrical package, and underfloor heating 155,000 euros

Tiling work will be contracted separately as it is cheaper, 9,000 euros

Notary, land registry, and property tax 5,500 euros

Outdoor facilities that would have to be done immediately (Carport needed later, for example) 10,000 euros

Kitchen 8,000 euros

Reserve 7,500 euros

We can buy new furniture, outdoor plants, garden tools, pay for the move, and a building consultant who supports us with the construction from our own money. I have calculated a total of 25,000 euros for this, which we also have. So overall, this would require financing over 100% since we have no further capital. We have allowed ourselves many holidays, have seen the world, and the wedding was also very expensive. So, we need 295,000 euros in debt (at least if you believe the seller’s calculation). Oh man, we have never had debt before. This is really breaking our heads. 15,000 euros must be taken out through an expensive loan, 280,000 euros can be taken out via a "cheap" bank loan. Since long-term planning is important to me, a long fixed interest period was also important, and I have discussed this with the banks. Here is our monthly expense/income situation:

3,400 euros income minus 700 euros when my wife goes on parental leave. We are planning a child, so I want to calculate with the small income; otherwise, it would make no sense.

So 2,700 euros income against expenses of:

850 euros bank loan installment fixed for 30 years
250 euros private loan installment fixed for 5 years
400 euros house ancillary costs
100 euros house reserves
500 euros groceries
200 euros leisure/clothing
200 euros car
200 euros miscellaneous

I break even, at least as long as my wife is on parental leave. Purchases or saving would not be possible during this time. Our jobs are secure, our salaries increase annually according to tariff, the main loan installment is very small, and the remaining 120,000 euros that we would still have after 30 years could be completely paid off through special repayments or by increasing the repayment rate.

Now it’s your turn. I see no chance and would fall back on plan B. A large home savings contract, e.g., 100,000 euros, and save equity for the next 10 years. The downside here would be that we would have to stay in our apartment, which we no longer like at all. The plot of land is so beautiful. It’s a completely different feeling of life there. I didn’t actually want to raise my child here, after all, they would be torn away from their circle of friends when we move. And can you still find a truly great piece of land then? Can you find a cheap house because others have overextended themselves? The financier told us that most of his clients fix their interest rates for 10 years. On the other hand, the interest rates would also be high for us then if others can no longer afford it. I don’t know. What do you say?

Best regards

P.S. Maybe also important, we are both 30 years old.

If you buy the plot of land and the house from the same provider, real estate transfer tax is due on both, which means you are not at 5,500 euros but somewhere between 10,000-15,000 euros.

I find it calculated too narrowly if I assume that there are additional costs that you have not listed yet, for example, the floor slab is included in the offer, additional sockets (otherwise there is only one in each room), etc.

Can you do without the vacations you have taken so far?
Costs for the child? Child benefits will not cover everything.
I find a 300,000 euro loan for 1,000 euros per month quite cheap, could you provide the values for the loans here?

I also find this too tight.

The loan also seems to have almost no repayment. You are probably still at 100% after 10 years and even after 20 years not much goes down. That means 20 years of risk and the house "never" belongs to you.

I wouldn’t put myself through that.

Just looking at your costs, it seems way too low to me, especially the car and what I will now call leisure.

We were/are in the same situation, hardly having any equity. After a lot of calculations, we decided to take out a 10-year loan (mixed interest rate 1.85, loan amount 227K + 100K KfW) with a repayment rate of 4% plus a special arrangement, so that after 10 years (without special repayments) we will have paid off almost 50%.

Now seriously: why should a new building be cheaper than an 'older' and similar existing property? That means comparable residential location, roughly the same size... These are all just bait offers. Something must be wrong there.
Your salary, on the other hand, is already a good foundation. In your place, I would rather save for a few more years and accumulate equity. Maybe also see if you can do without the travels etc. at all. At least the 15,000€ private loan should be covered from equity.
20,000€ incidental construction costs are also too little – as can often be read here.

Normally, I don't respond to financing questions, but here - without wanting to offend you - a few things "have to" slip out:

1. The number of typos, the formulation of the post, and the income may suggest that the workplace might be less secure than it appears to you. If that is actually different, then congratulations. In any case, I do not believe in strong income increases in the coming years.

2. Given the income and family planning with the corresponding reduction of available income while the demand simultaneously increases, the financing seems problematic to me. I already see problems in obtaining a reasonable and serious construction loan in the first place. The framework conditions simply do not match the required amount of loans needed. Even the clause about the required private loan gives me serious cause for thought. Why is it so necessary? Does the "promising" bank not provide a loan beyond the mentioned EUR 280,000? That seems to be the case.

3. Being happy has only a distant connection to homeownership. Of course, it is nice to move into "your" own house and instead of paying rent, to pay the monthly amounts for the property. What is often overlooked is that financial bottlenecks are relationship killer No. 1. Nothing is more detrimental to happiness than having to turn every cent several times. Better to be a bit more modest then. How about acquiring an existing property or a condominium? I don't know the housing market in Berlin very well, but even with a short search, quite a few properties are available.

I really dislike crushing dreams, have never done it here before, but this project is likely to turn into a nightmare, at least in the medium-term perspective.