Building financing - preliminary indication regarding loan amount

Hello dear forum members

I am new here and have already read quite a bit in the last few days. We are currently facing the question regarding the purchase of land and new construction of a single-family house.

Income:
Man: €6,400 net (excluding bonus)
Woman: €1,500 parental allowance (2 years parental leave until the end of 2021; parental allowance only in 2020; reduction to 0 in 2021); after parental allowance, part-time job with €1,800
2 children = €400 child benefit
Equity = €70,000 (+ additional buffer for unforeseen expenses)
Private pension provision of approx. €30,000 (fund savings plan, not to be dissolved)


Project:
1. Purchase of land for approx. €210,000 (including incidental costs)
Land financing: variable financing for approx. 1 year, then full repayment through construction financing with fixed interest rate for land + single-family house (15 years interest rate lock-in)

2. Construction of single-family house, 2 full floors + roof = living area of approx. 160-180 sqm (+ basement)
Planning of the single-family house still in the initial stage - contact made with an architect to basically understand what is possible on the plot and what is legally permitted. Decision regarding prefab, solid, or architect house still open.

Questions:
1. Is it sensible to use all of the equity for the land purchase?
Alternative: proportional use of equity and the rest for construction financing next year? What do banks prefer?
2. We still lack an overall idea of what a single-family house in the aforementioned variant might roughly cost.
We had about €500,000 in mind (including basement, roof, ancillary building costs, kitchen, floors, walls).
Is this somewhat realistic - I know there are no upper limits, but basically possible?
3. We would come to a total frame of approx. €710,000 (210,000 land + 500,000 single-family house) less €70,000 equity, so approx. €640,000.
3a) Is the financing volume of €640,000 in the above situation somewhat feasible for us or will banks reject it outright, or what do you think?
3b) Based on experiences/assessments, what should our maximum financing volume be?

I hope I am not too naive about this and would appreciate a few suggestions/recommendations.

Thanks in advance

1. You should always keep liquidity available for the actual construction. Do you manage to save when the [Grundstück] is included in the financing?

3a It depends. With 8,200 net, the 70k equity feels really low.

500k all in for a house with 180sqm and a basement I consider quite ambitious if not unrealistic...

If the plot is nicely level, I would consider painting the basement. Then the costs should not be a problem.

1. Is it sensible to use all equity for the purchase of the property? Alternative: Proportional use of equity and the rest for construction financing next year? What do banks prefer?

It is always sensible to use your equity in advance. At the latest when building, many banks even require it (we do too).

2. We still lack an overall idea of what a single-family house in the above-mentioned variant could roughly cost. We had aimed for about €500,000 (including basement, roof, incidental construction costs, kitchen, floors, walls). Is that somewhat realistic - I know there is no upper limit but basically possible?

No, that will be very tight. With your income, an upscale lifestyle is assumed. This will also be reflected in the house construction. Normal costs start at €200,000 (upscale more) + basement + incidental construction costs + kitchen + garden + much more.

3a) Is the €640,000 financing volume in the above situation somewhat affordable for us or do banks reject it directly or what do you think?

€640,000 with 5% annuity is €2,700 monthly – then you still have much more left for living expenses than most home builders even earn (before financing). Banks see that very calmly. Whether you can be relaxed then, I don’t know. Age? Length of working life? Savings rate (little equity with that income)? Lifestyle?

Thank you very much in advance for the responses. Attached are some additional details: Age: Man mid-30s and woman late 20s - working life still about 30 years. Children: baby and schoolchild Current savings rate: 3-4 thousand (approx. 3 thousand cash, the rest in ETFs and retirement provision) Equity capital: Is being built up - in recent years we had separate households and just lived (vacations, car, eating out, etc.). Due to children, changing priorities and age, the focus is increasingly on value retention rather than pure consumption. Part of the money has gone into stocks, which currently do not make sense to liquidate Lifestyle: Normal - 2 vacations per year, 2 cars, no overpriced shopping tours, currently we live very cheaply (900€ all-inclusive) in the Rhine-Main area