Compare construction financing offers - Which one is realistic?

Hello!

About us:

Net income of €5435, 2 adults, 2 children.

We want to build in BB, including land, house, ancillary costs, etc., we need a net loan of about €564,000. Since we have no equity, an equity loan will definitely be added. Now we have two offers:

1. Equity loan (€60,000) with 5.89%

Main loan (€454,000) with 1.99% nominal interest and 2% repayment

KfW home ownership (€50,000) with 1.65%. All for 10 years

2. Equity loan (€50,000) with 6.3% for 10 years

Main loan (€513,000) with 2.84% for 20 years with 1.5% repayment.

Both have a monthly burden of about €2200.
The equity loan is to be paid off after 8 years with special repayments (realistic, due to premiums and special payments) so that only a rate of about €1800 remains.

What do you think about the offers? They are from two different advisors. Both approach the matter completely differently and we are a bit overwhelmed.

Regards!

This is another DSL offer for all gamblers.

If you think that’s enough and you can handle it. Then go for it!!

You have at least 400 € additional costs alongside the 2,200 € = 2,600 €

That means 48% of your monthly income is gone! Every month!

Do you want that? Do it

I would rather think about whether you want to put yourself through this over this period and can afford it. That means, if a job disappears, that’s it.

Also ask yourself why there is no equity with such an income.

To be able to advise you here, a few details about you would be helpful.....for example the question whether the income will remain the same or whether you work part-time, for instance...

Personally, a rate of 2,200 euros would be too high for me to still be able to sleep well, but we don’t know your situation well enough...and 2% repayment is very, very little, you’ll be paying off forever.

Most want to have such a house paid off before retirement, but maybe that’s not your motivation?

I would definitely not finance for only 10 years in this low-interest phase, especially not with such a high loan amount, try to fix it for 20 years....What will you do if the interest rate rises after 10 years, then you’ll have to pay significantly more than 2,200 per month to keep your house!

Don't you think the loan amount is too high for you? On the €2200 installment, you still have additional costs of €400-450 coming to you? If necessary, you should also make provisions for unforeseen expenses (car, house, inventory, etc.).

Don't you find the 10-year fixed interest rate period for the mortgage a bit short? Considering that your conditions are not the best, you are taking quite a risk with the main loan.

I don't want to discourage anyone from affording a house, but the financing should at least be well thought out.

In your case, I would set the fixed interest rate period as long as possible (25-30 years) and keep the repayment at a minimum of 2% because your loan-to-value ratio for the amount is, to put it mildly, a disaster.
Unfortunately, that’s the case, because the broker saw no other option based on the predetermined installment of €1800 (I assume) than to set either the fixed interest rate period ridiculously short or to reduce the repayment to 1.5%. Think about it!

There are plenty of mortgage calculators online. Take a look at how high the total costs, outstanding debt, and term are for both options.

To be able to advise you here, a few details about you would be good.....for example the question whether the income will stay the same or if you, for example, work part-time...

Personally, the rate of 2,200 euros would be too high for me to still sleep well, but we don't know your situation well enough....and 2% repayment is very, very little, you will be paying off forever.

Most people want to have such a house paid off before retirement, but maybe that is not your motivation?

In the low-interest phase, I would definitely not finance for only 10 years and especially not with this high loan amount, try to fix it for 20 years....What will you do if the interest rises after 10 years, then you will have to pay significantly more than 2,200 per month to keep your house!

Thank you very much for your answer.

About us. He has been with the company for 25 years, now in a management position. She: permanent disability pension of 1,160€ + child benefit and maintenance.

After deducting all costs, we would have 1,300 euros left for living expenses with the rate (clothing, occasionally eating out, etc).

With the second option, we would be finished in about 30 years (with the special repayments we want to make).

Guys, this is absolutely harakiri! Such financing will very likely drive you into ruin. The net income is anything but generous. The financing amount is extremely high, as is the monthly installment.

As already mentioned, the repayment is far too low. The interest rates are too high.

The question of why no equity is available would be important to better assess the overall project.

My personal advice: definitely do not build under these conditions.