Can we afford this?

Hi!

We (my wife, 25, and I, 25) are about to start our construction project soon. At the moment, we are trying to gauge our performance capacity a bit. Therefore, I would appreciate it if you could take a look at it.

We are currently two, but a child is planned for the next one or two years. Both are career civil servants for life and work full-time.

[*]Income and asset situation:
[*]What income do you have (gross/net)? 2 x 2,250, so 4,500
[*]How much child benefit do you receive? none, no children
[*]Other transfer payments like parental allowance, sick pay, etc...? none
[*]How much equity do you have? We have a plot of land worth about 100,000 euros, 15,000 in cash, and two home savings contracts totaling 10,000
[*]How much equity do you want to invest in the house project? The plot of land and the two home savings contracts

Expense situation:
Housing costs:

[*]current cold rent: 823
[*]current warm rent: 1,150
[*]electricity: 74 (not a realistic consumption)
[*]gas: none
[*]water, sewage, garbage fees, street cleaning: included in warm rent
[*]phone, internet, mobile: 60

Mobility costs:

[*]car loan (or savings rate for a new car): 180
[*]insurance: 470/year
[*]taxes: 260/year
[*]fuel: 250/month
[*]repairs: 500/year

Insurance costs:

[*]private health insurance (also supplemental health insurance, daily sickness allowance, etc.): 225 and 254/month
[*]liability insurance (including pets): 20/year
[*]capital or term life insurance: 12/month
[*]pension insurance (also Riester, Rürup, etc.): 123/month
[*]disability insurance: 2 x 40/month
[*]other insurances (such as travel insurance, funeral insurance): foreign health insurance, 2 x 12/year

Living expenses:

[*]groceries: 400
[*]restaurant costs: 100
[*]personal care/drugstore: 30
[*]medications: 20
[*]clothing: 100
[*]club memberships/gym: 10
[*]TV/video/audio/CDs/DVDs: 75
[*]donations: 25

Savings contributions:

[*]vacation: 200
[*]house: 100
[*]hobbies/gifts: 100

Income and expense totals:

[*]total income: 4,500
[*]total expenses: 3,674
[*]balance: 825
[*]of which total cold rent and dispensable savings contributions (e.g., savings rate for house): 1,350

I can’t tell you anything concrete about the house yet, since we are still in the exploration phase and trying to figure out how much we can actually afford.
Roughly, we calculate construction costs (including incidental construction costs, without the land since it is already owned) at around 400,000 euros for about 150 sqm.
Would that be realistic, and do you think it would be manageable with our salary?

If salaries can be significantly increased during the term, the project can be undertaken - the liquidity reserves for everyday expenses are rather limited, which requires increased discipline.

You have €825 left over per month and also "savings" and a cold rent of €1350? Also about €400 additional costs for your apartment? I haven’t quite understood where the €1350 comes from. I found cold rent, what is the rest?

That means you have €2575 "left over," from which on the one hand the house project (financing, additional costs, reserves), but on the other hand ... what exactly else? to be covered? Vacation, saving for a new car,...?

Basically, the sum of €400k would still correspond to the income, but it seems quite little is left over. The land as equity is good, the civil servant status of course as well. You are young and have a long time for repayment. On the other hand, if your income drops off soon due to family planning, it looks much worse. With one income, the project simply cannot be managed.

If salaries can be increased significantly over the term, the project can be tackled – the cash reserves for everyday life are rather tight, which requires increased discipline.

Yes, salaries will increase significantly and regularly over the next few years; we are just at the beginning of our careers.

You have 825€ left per month and also "savings contributions" and a cold rent of 1350€? Also about 400€ ancillary costs for your apartment?
I haven't quite understood where the 1350€ come from. I found the cold rent; what is the rest?

That means you have 2575€ "left over", from which on the one hand the house project (financing, ancillary costs, reserves) and on the other hand ... what exactly else? have to be paid? Vacation, saving for a new car,...?

Basically, the sum of 400k€ would still fit the income, but there seems to be quite little left over. The plot as equity is good, the civil servant status of course as well. You are young and have a long time for repayment. On the other hand, if your income ceases soon due to family planning, it looks significantly worse. The project simply cannot be managed with one income.

No, currently 825 euros remain, which simply stay in our accounts and are not saved specifically.
Of the expenses, 1,350 euros are the warm rent plus the current savings rate for the house; however, I made a mistake here, and 250 euros of ancillary costs still need to be deducted. So 1,100 of the expenses are cold rent plus savings for the house.

We would therefore have 1,100 plus 825 left for the installment and everything that exceeds 250 euros of ancillary costs. Otherwise, provisions would still have to be made from this.

No income will cease. If we got married and had a child, I would earn 2,900 euros, and my wife would receive 750 euros parental allowance for two years. From the second or third year, she would work 25% again and thus cover the 750 euros. Depending on need, she could increase to 30% or 40%.

You write 1150 warm rent, plus 74 electricity, and a savings rate for the house is given as 100€. With 823€ cold rent, that's 327€ additional costs plus electricity, making 400€ additional costs. So I see: 925€ cold rent/saving for the house, 825 remain "like that"... makes 1750. and 400€ additional costs you already cover now (plus 60€ telecommunications). That is already enough for the house... 1750 would therefore be for the installment, and everything else you want to save. No idea what interest rate you get, but if you assume a loan amount of 400k€ and 3.5% annuity (interest and repayment), then a rate of almost 1200€ would be due... Whether you can manage with the freely available remainder of 550€ you have to decide. It's tight and if your income decreases during parental leave (2900+750+200 child benefits = 3850), you won’t make ends meet. Here and now you will get the loan, but you also have to get by during this time!!

Today I am in a good mood and just say go for it. Land available, both civil servants, hardly anything can go wrong. The time with the children should be manageable, but then working again with more than 25% so that vacations are also comfortably possible.