Can financing alone be managed?

Hello,
I have been an active reader in this forum for a few weeks now because I have recently been dealing with a house purchase.
I have also set my sights on one. It is a single-family house with 117sqm living space on a 2500sqm plot. It was built in 1959, completely renovated and refurbished, fully basemented (dry) with a large garage, workshop, and a large outbuilding in the garden.
The whole thing is supposed to cost €108,000 + additional costs without broker fees.
Land prices here are about €20/sqm.
Regarding the financial situation.
I am 33 years old, earn about €2,100 net per month. Rent is currently €250 cold/€385 warm. No other loans. Equity of about €40,000 is available, which I would like to keep only for the additional costs and as a reserve.
I have imagined a rate of about €500-550 with a 20-year fixed interest period and, if possible, full repayment during this time.
According to the financial advisor, 100% financing with under 3% interest is probably no problem. I have yet to get the exact offer.
Would this be manageable for me, or is it perhaps too risky?
Thank you

I would invest €25K of equity and keep the installment at €500-600 - then you will be done in under 15 years.

There are some calculators for annuity loans on the internet, I would experiment with them a bit so you get a feel for it - especially the actual loan costs are significantly different in comparison if you don't use equity, even if the interest rate is only 3%.

From the feeling (I also once had to hold a property alone with about 650 repayment on a somewhat lower salary) I see no problem. However, you should list for yourself what costs you have for your living expenses per month. If you already use about 300 - 400 for gasoline to get to work, or go out to eat every day, it means restrictions or it could get tight if you still have other obligations to meet like a high life insurance, car, or other expenses. You should at least calculate 300 for the ancillary house costs (property tax, building insurance, garbage, water, etc.)

As long as the bank cooperates (they always prefer two borrowers) and there is a permanent job...

2500 sqm of land is quite something - your hobby for the next few years?! :cool:

Hello,
thanks for the feedback. I would say I actually live quite frugally. I drive a maximum of 5000km per year. I go to refuel at most once a month. My work is 4km away in town, so reachable by bike. I basically only have the usual expenses like food, clothing, car insurance, etc. I rarely eat out, I even make sandwiches for work so I don’t have to eat in the cafeteria. I’m stingy about that. Whether the job is secure or not, unfortunately you can’t say if you’re not a civil servant. But I have been working at the company for 12 years now and hope for many more. I have no other obligations as mentioned above. For me, it’s just about wanting to manage it entirely on my own. I also roughly calculated the 300€ utilities. Would heating costs already be included for you?
I’m still unsure because I’m not the type to like going into debt. Everything I have bought so far, I have always been able to pay in cash.

Yes, the 2500sqm plot is obviously a nice thing. You can really spread out outdoors. That’s not unusual here in town. I’ve already looked at several houses here, all of which had between 1500 and 2000sqm plots. The above-mentioned price per sqm is already quite high. It can be much cheaper here. It’s just a structurally weak region here. Bad if you ever had to sell your little house again.
I will definitely do a second viewing with an expert to be on the safe side and sleep on it for a few more nights.

Hello,

from a value development perspective, you should approach this very coldly, because the property is already over 50 years old now, and if you want to sell it again in about 30 years, the property will be over 80 years old and will presumably be located in an area that has not developed further even by then, ergo: value zero. Sounds harsh, but that's how it is. In good areas, the house would probably already be destined for demolition and the plot replanned.

What remains for you is definitely the plot or the land value in 30 years minus demolition costs. The difference to the acquisition costs is roughly your "rental costs" calculated over 30 years.

Small example calculation:

1. I appraise the plot at 28,000€. 1000m² fully count as building land (20€), the rest as garden land (approx. 5€). This value would have to be calculated differently if more than 1000m² is actually buildable.
2. Value of the house: 108,000€ - 28,000€ = 80,000€. Could match your description, but actually plays no role in this consideration.
3. Value increase of the plot in 30 years, adjusted for inflation: 0.
4. Demolition costs approx. 25,000€ (today's costs, assumed equally expensive adjusted for inflation in 30 years).
5. Acquisition costs today: 108,000€, value loss house in 30 years: 80,000€, demolition approx. 25,000€ => value including plot in 30 years fictitiously: €0 - 5,000.

Rental costs - cold - per month: 160,000€ / 30 / 12 =~ 450€.

The 160,000€ represent the purchase price + incidentals + loan costs. You would then have the 40,000€ equity untouched in your pocket.

The comparison value of 450€ means the following: if you can rent a comparable house for a similar amount, rent and purchase come out roughly the same, if the boundary conditions are considered realistic. The disadvantage is of course always that you do not own a rental property, the advantage is that you are not tied to a location.

However, if you maintain your house well and it still brings in a purchase price in 30 years because it actually still has a residual useful life, buying is recommended. If you can rent a comparable property for about 750-800€ warm (or less), renting is definitely an option.

Best regards Dirk Grafe

A striking way of presentation that, to be honest, I have not thought about at all yet. Thank you