Buying a House with Own Capital - Requesting Experience Tips

I have been observing the forum for weeks now, and I have decided to introduce myself.

I am 27 years old, my wife is 29, and we have two children (2 months and 1.8 years). We plan to have another one in about 2 years.

Our financial situation:

Equity: 10,000 Euro + a car worth approximately 6,000 Euro

Building savings contract: 5,000 Euro (currently) Maximum amount: 10,000 Euro

Net salary: 2,300 Euro

I will leave out the income (children, parental allowance).

We would have 1,000 Euro per month left to pay off a contract. In 2 months, I will have a net monthly income of at least 2,500 Euro.

So we want to buy something of our own. We live rather rurally, so a used house, preferably in a village. I am skilled at DIY and also have a large network of people who can help me with such work.

We have thought about a sum of approximately 200,000 Euro. Preferably less. So a house for 170,000 Euro and the rest are the standard fees including costs for any remaining work on the house.

Is this realistic?!

I would like to thank you in advance, I really find it great to have found this forum in order to get an impartial opinion from people who still know what they are talking about.

I’ll just say a few things without judgment.

Very little equity, almost negligible, more to be seen as a buffer amount.
The car doesn’t matter :)

Your net income is tight, for a €200,000 loan it might just be enough, but only with 1% repayment... and that’s actually not good. With 2 children it’s even more difficult, since they are expected to get somewhat more expensive as they get older.

I can’t say anything about the purchase prices, in our area, even in the village, for €200,000 you only get a tear-down house. I can imagine you can get something nice for that, but what about renovation? Windows, heating... over the years that can drain your wallet.
My mother had to buy 3,000 liters of heating oil this year, you start crying at a price of 94 cents per liter. The house is uninsulated from 1965.
I don’t think you’ll get many much newer houses for €170,000.

We are moving to a village in the Palatinate, and even there the huts cost €240,000 upwards. Maybe also due to the proximity to Karlsruhe, but who knows, maybe you come from the new federal states, or near the Dutch border, where it’s supposed to be somewhat cheaper.

Unfortunately, I can’t give you a final tip. :)

Thanks in advance for the reply. Maybe I was too general in my expression. Could you perhaps give me a tip on how to proceed best now?? From how much equity is it reasonable to start considering buying? We wanted to move out in about three years at the latest. Many thanks in advance.

The more equity, the more sensible.
At least the incidental purchase costs are recommended as an equity share.
Even better, incidental purchase costs + moving / entry costs (new paint on the wall, etc.).

So if your budget is €200,000, deduct the real estate transfer tax, notary, land registry office, and possibly the broker. This will give you your financing requirement. The rest should be equity.

Old houses need a new heating system, windows, and a new roof in the short to medium term (depending on the age of the house). In addition, renovations are needed upon moving in.
These costs should not be underestimated. I would claim that you won’t get by with €30,000 - plus the incidental purchase costs you mentioned.

€2,500 net per month is not great with two children. But if you say you can comfortably afford €1,000 per month for financing, then with a loan amount of €200,000 you can put in a total of 6% monthly and you’re at exactly that €1,000.
That means: if you get a loan at 3% effective interest, you can take 3% initial repayment. 4% interest means 2% repayment and 2.5% interest means 3.5% repayment, etc... A relatively simple calculation.
So always adjust the repayment rate with the interest and don’t assume that you save money with a low interest rate (which is true, but the repayment proportion also suffers unless adjusted).

Don’t forget: the ancillary housing costs.
Insurance, electricity, garbage, water, gas / oil, etc. are added on top of the €1,000.

Good day,
I agree with the statements made, although here in rural areas the category of demolition houses is significantly cheaper.
Almost all buildings from the 1970s and earlier can be classified as demolition houses. Through my work, I have examined many of these buildings; just for the technical upgrade: windows, insulation, heating, sealing against moisture, sanitary and electrical installations, quickly 100,000 euros are spent. But then you still have an old house that, after renovation, is awkwardly laid out and at best meets the KFW 100 standard.
So we are not talking about 200,000 euros but 300,000 euros plus beautification measures and conversions.
If a renovation costs more than 60% compared to a comparable new building, demolition and new construction make more sense.

Assuming 300,000 euros, at least 20% equity should be available. That would be about 60,000 euros in equity to finance solidly.
I think your financial advisor will most likely laugh out loud when you present your project.

That was a clear statement.

Yeah, sure, in the worst case it is also as he described it. But you can also be a bit luckier. So my plan now is to save for another 2-3 years and then start searching again. By then, there should be at least 30,000 saved up.

Today I’m also getting a visit from someone who knows about loans and all that and can explain everything to me (effective annual interest rate, etc.).