Can we not afford a house?

  • Erstellt am 2012-06-08 23:08:59

basementmedia

2012-06-08 23:08:59
  • #1
Hello everyone,

I am currently feverishly calculating whether we can afford a house and somehow can’t believe what I have just added up.

On the one hand, my "What does a car cost" research showed that a car (including depreciation, taxes, etc.) probably costs around 400 euros per month, so with two cars we would be at about 800.

My "What does a house cost" research showed that a homeowner’s costs are about 500 euros per month (taxes/insurance/sewage/electricity/heating/chimney sweep/etc.).

Then there are my estimated grocery costs of about 500 euros.

So we would be at a total amount of 1800 euros!

But that’s not nearly everything yet: Then there are the disability insurance (me + wife), accident insurance (me + wife + child 1 + child 2), family liability insurance, broadcasting fee, mobile phone, kindergarten fees, and so on and so forth. For us, that adds up to about 650 euros.

So that puts us at monthly expenses of 2450 euros.

And we haven’t even factored in that sometimes you want to go out (cinema, pub, etc.).

If you now also want to assume that you want to pay off a rate of about 800 euros per month for a standard house of about 150-160 sqm (that’s the minimum I must pay if I ever want to be debt-free before retirement), then the monthly net income would have to be 3250 euros!

But I know a lot of people (myself included) who don’t earn 3250 euros NET but still built a house and apparently get by halfway decently.

So the question would be: Where is the error in the above calculation? Or is it all correct and I shouldn’t build a house?

I am grateful for any tips and a lively discussion.

Kind regards

Daniel
 

wadi1982

2012-06-09 11:26:10
  • #2
Just dug out my calculation. I think there are many factors. For example, where do you live? Regionally, it is of course quite different. Then there's the simplest possibility. Do you know what your acquaintances pay back in financing per month? Maybe they simply aren't debt-free before retirement?

Topic car: Here it strongly depends on the commute. My wife and I have the same employer, so we only need one car, and there's the short commute of just under 10 km. Including reserves for repairs, we come to €200 / month.

Topic house: I think this varies quite a bit regionally. We're currently calculating with €400 / month, but without children. -> I think you're already quite well off there.

Topic groceries: We currently manage without problems with about €300 per month. -> With children, I think your calculation also fits.

Miscellaneous: We currently come to just under €450 -> With children, that should fit for you too.

Unfortunately, I think you don't have a mistake in the calculation. What I think "breaks the curve" for you are the cars.
 

KnappeKiste

2012-06-09 14:44:44
  • #3
I have already read many entries here with similar content, and the question is rarely really clear to me.
It doesn’t matter at all how much you spend on living; what counts is how much is left in the end. Only then does it become clear what is affordable and what is not.
The decision to build a house is not made overnight. After half a year of keeping a household budget and an Excel spreadsheet, you are already much further along.

My personal example:

I have been "monitoring" our ongoing costs for 1.5 years, and on average there is 700 € left over. We have a cold rent of about 450 €. Minus the increase in ancillary house costs compared to the ancillary costs of the apartment (reserves, larger living area to manage regarding electricity, heating, water, and insurance, etc.), a loan installment of 900 € would be the maximum.
Now you set a deadline for repaying it and then use an online calculator. Equity must still be offset, don’t forget the ancillary construction costs (there are good posts here in the forum!) and above all, when it comes to the interest rate lock-in period, it’s wise to add a bit to today’s interest rate. This is then a first guideline; a professional calculates more precisely later.
This whole thing has led to the fact that a 160 sqm house, even with a 4100 € family income (2 adults with secure salaries, one part-time, + 2 children) and equity that, after deducting ancillary costs, can still afford 10 % of the house, simply cannot be “properly” represented.

Your remark that you know families who build with less is completely correct. On the one hand, the market for foreclosures offers a lot; many of those have built and financed with barely anything; on the other hand, there are many who live lavishly in their own house and after ten years only afford a week’s vacation in Denmark. In those cases, everything is saved, including on the children (presumably everyone knows the prices when the whole family goes to the zoo). In the end, everyone has to decide for themselves what their life should look like in the next 20-30 (!!!!!!) years.
We have decided on a smaller scale and are now looking for a reasonable existing property (semi-detached house/double house).
 

perlenmann

2012-06-11 10:10:56
  • #4
So basically, your calculations are correct. The household utilities could be a bit lower, the grocery item possibly a bit too (after all, everyone is the master of what they eat and how often they, for example, take a bath and have 24-degree room temperature. Depending on the region, of course, that also varies). I think you also calculated the car correctly (depending on what you have). A car simply doesn’t just cost gasoline! In addition to the net income, there's also child benefit. I also broke everything down once in a list, and against that, you can also have warm rent + savings amount = installment + additional costs + reserve. Your families either have such a high income, fewer to no car costs, and/or higher equity?!
 

Shism

2012-06-11 13:48:01
  • #5


Do you already include fuel in that? If not, I find 400 a bit much... you can get by cheaper..



What did you calculate as reserves here? Because without a proper reserve portion, the amount seems a bit high to me... the heating costs in a modern new building are quite low...



??? So with 800€/month you might be able to pay the interest, but there isn’t much left for repayment... of course it depends on your equity and what you pay for land, but if I assume equity equal to additional costs and calculate 300,000 for house + land, then financing that sum, depending on the interest rate, already costs you around ±800€!

If you want to be done before retirement, I would rather calculate with 1100+... (depending on your age of course!)



If together, including child benefit, you don’t have 3250€/month, then you really will have to accept that you cannot build a 150-160 sqm house and support 2 children + 2 cars...

Maybe you can get favorable interest rates through funding programs for young families, so that you can manage with your 800€ in the first 10-15 years, but even then you should be at least at 3000+ to even think about building a house...

It sounds harsh but that’s the reality nowadays... with one "average income" and the wife working part-time, it’s often tight... if the wife can later work full-time or there are career advancements, usually there is some breathing room, but before that it can get pretty tight...

How much net monthly income do you have if I may ask? And what did you assume for the house construction costs?
 

Der Da

2012-06-11 13:49:14
  • #6
Your calculation is of course very personal. We certainly don’t need 400€ a month for our car, but definitely need more for groceries. 500€ for utilities in an efficiently built house, with low heating costs. I think 300 is more realistic there, but it really depends heavily on the region. Even the water price varies greatly by region. But 800€ every month for cars would make me think twice. Is that really necessary, or is public transportation simply not worth it here? I mean, if someone asks me: house or car, the home wins... Carsharing and affordable small cars make it possible.

People who start building with less than 3000 net income, I consider very risk-taking anyway. Or they like their bank so much that they gladly pay the bank 750,000 for a 250,000 loan, and remain at 1% repayment. As for me, I plan to have the house paid off within the first 20 years.
 

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