Building a house without equity

Good morning and thank you very much for your responses.

The property is being acquired by another company, so only property tax is payable on it.

There are enough sockets available and already planned. The foundation slab is of course included as well. I have additionally budgeted 2000 euros for motion detectors and LED SPOTS.

The interest rate for the bank loan is 3.1% and it is repaid with only 1%. After 30 years, we would still have 120,000 euros of remaining debt. I would say that we can very well compensate for this later on through special repayments. My salary continues to increase according to the collective agreement; in 20 years I will earn 3000 euros net anyway, excluding the annual salary increases. I have a lifelong employment guarantee. Fortunately, I do not need spelling for that. That is true, it is a big weakness of mine. We have a small car that we hardly ever use, and in the house we would not need to use it often either since everything is within walking distance.

The incidental construction costs are flat-rate; I have nothing more to do with that. I wrote private loan because it is very expensive at 6%. In fact, this is another bank because it offers a better interest rate than that of the mortgage loan. Unfortunately, I cannot finance the ancillary costs and kitchen cheaply.

There are no comparable properties in the area. Those we have viewed so far were far too expensive after renovation and never met our wishes.

When I look at my calculations now, I myself see that this would be a harakiri action with a child. The child is more important to us after all; it is slowly time. We are just very annoyed with the current apartment, which is why we dreamed of our own house. New condominiums in Berlin start at 300,000 euros; that would not be an alternative. Personally, I also find nothing in existing properties.

But now I have come across a company through a colleague at work that we really like and builds in Brandenburg, so good that we have already met with them 3 times, the plot is a dream. Right on the Berlin city border, within walking distance to the S-Bahn, schools, daycare, shopping facilities, everything you need.
The financiers say yes, it's possible, the seller says of course yes, it's possible, but what do you say?

Plot 550 sqm 80,000 Euro

Flat rate 20,000 Euro for:
Construction water and construction electricity, including consumption
Remaining services 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 work and special features such as electric roller shutters, clay roof tiles, extended electrical package and underfloor heating 155,000 Euro
Tiling work will be contracted out separately because it is cheaper, 9,000 Euro
Notary, land registry and property tax 5,500 Euro
Outdoor facilities which would need to be done immediately (e.g., we need the carport later) 10,000 Euro
Kitchen 8,000 Euro
Reserve 7,500 Euro

Personally, I am a bit surprised by the numbers:
As far as I know, Berlin is a very expensive area – the Berlin surrounding area as well – so I am surprised by the (for Berlin conditions) very moderate price of the plot, especially considering the location/equipment of the area. Well – if it was told to you like this, then it should be correct.

Flat rate 20,000 Euro – is this figure fixed in the contract by the house building company (this would be unusual) and thus guaranteed? Otherwise, expect a higher amount.
110 sqm house for 155,000 Euro – it would work with the calculation of 1,500 Euro/sqm for low to medium equipment, but the price seems quite low to me. But surely the experts in the industry can comment on this.
Tiling work including materials 9,000 could be accurate – but then the tiles should not become more expensive (or the planned area). The wage structure in East Germany is somewhat lower. Is the whole house to be tiled? Otherwise, you will need another floor covering = costs.

Notary, land registry, property tax – too low. Although our plot was cheaper, we are in this category – and to my knowledge, there is a higher real estate transfer tax rate in the Berlin area. Depending on whether you also get the plot through the building company or there is a verifiable connection for the tax office between the plot seller and the building company, you have to pay the acquisition tax on both plot and house (price), as wrote.
Outdoor facilities OK (it will be done similarly for us)
Kitchen OK (ours was planned in the same price range and ended up costing 1,500 Euro more)
Reserve too low

Overall, it comes down to financing over 100% because we have no additional capital. So we need 295,000 Euro in debt (at least if you believe the seller’s calculation).
15,000 Euro must be taken out as an expensive loan,
280,000 Euro can be taken as a “cheap” bank loan. Because long-term planning is important to me, long-term fixed interest was also important, and I discussed this with the banks. So here is our monthly expense/income situation:

So 2,700 Euro income versus expenses of:

850 Euro installment bank loan fixed for 30 years
250 Euro installment private loan fixed for 5 years
400 Euro incidental house costs
100 Euro reserve for house
500 Euro food
200 Euro leisure/clothes
200 Euro car
200 Euro miscellaneous

I break even, at least as long as my wife is on parental leave. Purchases or savings would not be possible during this time. Our jobs are secure, our salary increases annually in line with the collective agreement, the main loan installment is very small, the remaining 120,000 Euro that we would still have after 30 years could be paid off completely with special repayments or by increasing the repayment rate.

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

A word about your expenses:
400 incidental house costs – OK (since you have another 100 set aside for reserves, the actual incidental costs could be lower – but it also depends on the house)
500 food + 200 leisure/clothes is set too low – at the latest, when you have a child, it will be difficult
200 car – depends on how much you use it. One or two cars? Are there longer driving distances due to the new location? Is saving for a new car included?
200 miscellaneous – a buffer is always good.

Loan
280,000 for 850 Euro over 30 years fixed is an annuity (interest + repayment) of 3.64% – you would have a maximum of 1% repayment in that. Without calculating it now, I think that more than 120,000 will be left on the ticker in the end. In my opinion, the repayment is set too low – even if you can/want to live with an outstanding loan amount at the end of the term.
15,000 private loan – why?
250 Euro for interest and repayment – you will be done with this after 5 years – if at that point you put this 250 Euro towards the 280,000 loan, you would end up with the stated 120,000 balance after 30 years.

But where do you want to get capital for special repayments then?

All in all, from my point of view, it’s a too risky deal. Better option B then.


Sorry – concluding job security from what is written here is, how shall I put it, presumptuous. Not everyone who builds has to be an engineer or similar. You can also have a secure job as a craftsman – as long as the company exists. In the past, garbage collectors were considered one of the most secure jobs – OK, now most German citizens consider themselves too good for that.


In our area, too, the price difference between a used (junk) property from the 60s and a new build is not very high – 20,000 to 30,000 added and that’s it. However – you are right: a new build should always cost more than a comparable used property.

[Sockets are sufficiently available and already allocated. The base slab is of course also included. I have additionally budgeted 2000 euros for motion detectors and LED SPOTS.

The interest rate for the bank loan is 3.1% and it is only repaid at 1%. After 30 years we would still have 120,000 euros of remaining debt.]

Our emails overlapped.

Therefore, just on these two points:
2000 euros for motion detectors and LED spots is too little - OK: depends on how many motion detectors (or possibly more expensive presence detectors) and how many spots.

Interest and repayment cannot be correct. A quick comparison calculation:
850 euros x 12 months = 10,200 euros annual rate
10,200 euros x 100 : 280,000 = 3.643% annuity (interest + repayment).
Either the interest rate is lower (at 2.6%), which I do not expect with a 30-year fixed interest period, or the repayment is only a smooth 0.5%.

Hello f-pNo,

Sorry - to conclude from what is written here to the job security is, how shall I put it, presumptuous. Not everyone who builds has to be an engineer or something similar. You can also have a secure job as a craftsman - as long as the company exists.

I marked Voki’s post with ‘like,’ so I am commenting here in response to your objection.

I agree with you that today orthography does not allow conclusions about the individual’s professional situation; here, in my opinion, Voki overshot the mark (unfortunately a ‘like’ cannot be limited). I am often horrified myself when I see some writing style (regardless of the HBF); on the other hand, I consistently write according to the old – learned – spelling, and thus – according to prevailing opinion – am not even capable of correct sentence structure and therefore do not comment on it.

Nevertheless, the structure/content of the original post suggests that a rather naive mind is behind the corresponding nickname, and therefore I prefer – possibly an overshooting – comment rather than silence. Although the price for the single-family house itself seems realistic to me (only a few, rare districts in Berlin are quite expensive), in my opinion neither the land price nor the incidental building costs fit. It is also not correct to claim that there are no existing properties/condominiums in Berlin + surroundings; my sister has lived there for many years and through her initial purchase of a condominium and recently a townhouse as well as its ongoing maintenance work, I know the market there quite well.

What always worries me is the assumption of many naive minds that a project like house construction can be managed without equity. In this respect, I can understand Voki’s conclusions against this background.

In the past, garbage collector was considered one of the safest jobs – OK, nowadays most German citizens consider themselves too good for that.

That has long since changed; nowadays you can look for supposed “foreigners” on the garbage truck… at least where we are.

Rhenish regards

Sorry - concluding from what is written here to the job security is, how shall I put it, presumptuous. Not everyone who builds has to be an engineer or similar. Even as a craftsman, you can have a secure job – as long as the company exists. In the past, garbage collectors were considered one of the most secure jobs – OK, now most German citizens consider that beneath them.

I want to clarify once again, because nothing is further from my mind than to attack or insult anyone here or elsewhere.

I have been involved in loans for 30 years, about 15 of those dealing with a solid triple-digit number of mortgage loans. I have had experience with problem loans for many years from my – also legal – activities.

Spelling errors, weaknesses in formulation, strange conclusions, and implausible assumptions often simply suggest that the user may not be able to adequately engage with the theoretical aspects of "the often most consequential decision of their life" (at least in monetary terms). These people are also susceptible to the often flattering words of home builders who promise the sky and later disclaim all responsibility. But it is of no use to prospective homeowners if the house is gone after a few years, the family is separated, and a ton of debts await them in the often following consumer insolvency proceedings.

So if I have been misunderstood, I ask for forgiveness. I do not measure the "value" of a person by status, reputation, or income. Spelling also does not play a role here. However, I measure my respect by the responsibility someone takes for their family and themselves. That is exactly what has happened here through the inquiry. He is informing himself and already senses that it might not be such a good idea to fulfill the dream of homeownership now in this way.

What is noticeable, however, is that a significant number of foreclosures or "divorce/separation sales" result from the affected persons simply overestimating themselves and their performance capacity and/or having succumbed to the whispers of sellers/builders.

I don't see any insurance in the ongoing costs? Also mobile phone or internet costs?