Concrete financing offer - how much must be "left over"?

Hello and good morning everyone,

I am new here and have already had quite a few appointments with banks, architects, and offices over the past few months. Now I thought I’d ask here for some independent opinions. I hope I can present all the necessary information to you and don’t make any mistakes or come across as clueless... of course, I have never bought a house before and unfortunately always feel like I’m being taken advantage of :-(

We are already quite far along in the planning to buy a 3-family house. We would move into the ground floor apartment ourselves, and the other two apartments would remain rented out (as they have been for 20 years each). The house is from 1971 and would cost us 350,000 euros. The house has modern plastic windows all around and an insulated roof completely redone 3 years ago. It is fully basemented and has 300 sqm of living space (2x 110 + 80). For the area, a bargain, but it is a rental house and not a residential house, so we would additionally need to convert/add and renovate for just under 190,000 euros. Deducting equity, this means we would need to borrow a sum of 410,000 euros.

The most attractive financing option so far seems to be through building savings contracts either with LBS or the building society of Postbank. The biggest advantages we see are the fixed rate until the very end and the possibility to make almost unlimited additional payments when money is available.

We have now received an offer with an interest rate of 1.5% for the first 10 years (savings phase) and a maximum of 2.35% for the repayment phase. This results in a monthly rate of 1,800 euros with a term just under 23 years.

TODAY this rate should be no problem. We earn just under 5,000 euros net together. The rental income would be 2x 450 euros. BUT we want to have children, so there won’t be two full salaries, we are therefore initially calculating with “only” my salary.

To my net income of 2,850 we would add one rent fixed (450) and use the second rent as reserves for the house (does that make sense? too much? too little?). That leaves 3,300 euros available.

We have calculated everything and arrive at the following monthly costs for the two of us today:
- Food/personal hygiene 360 euros
- Car gasoline and insurance 200 euros
- Insurances (legal protection, disability, dental, accident, life insurance) 270 euros
- Electricity + Internet 100 euros
That makes 930 euros (and we haven’t yet bought any clothes, gone to the cinema, or even on vacation!).
Plus the rate of 1,800 euros = 2,730.
Additional costs for water and heating currently run about 180 euros per month in our apartment.

I find it very difficult to say whether the roughly 400 euros left over then is a lot or little (too little?). Is it normal that people who want a baby, who buy a big house, only have a few hundred euros “left over”? We are not yet pregnant and would of course have another 2,200 euros available at the beginning, which we would already put into the financing to have a few months with less burden later on.

If my wife goes back to work after 2 or 3 years, it will certainly only be on a part-time basis. How much % of her current net is realistic to still get? Does it financially make sense (sorry to all romantics, but we wouldn’t need a marriage certificate to be happy together) to get married? How much net income would I then have approximately more, and how much less would she have? Or is it better if she works 50%, really has 50% of her current net, and we keep the tax classes as they are?

I hope I have presented the facts well and I look forward to tips!

Best regards and have a nice day,
Harry

These are very many different topics and questions.

1.)
First of all, for simplicity’s sake, I refer you to this thread regarding the tax issue related to sensible financing.



Even though I am not a fan of building savings contracts, it can definitely make sense for the rented part.

2.)
Regarding the rental
€900 cold rent for 190m² area I don’t really find much. Would the cold rent change at all due to the investment?

3.)
Income after marriage
To assess this, the future gross salary of both partners would have to be known. Alternatively, you can enter it yourself into a gross-net calculator on the internet. Your salary probably then with tax class 3 and that of your wife with tax class 5. Even though the choice of tax classes does not affect the actual tax burden for the year, it roughly reflects the future net income.

Very roughly, if your wife earns nothing at all after parental leave, through the marriage you should have about €400-450/month more in your pocket.

4.)
Reserves
Various values circulate on the internet regarding reserves:
Off the cuff, I found these recommendations from the Federal Ministry of Building:

[*]for houses up to 5 years old: €4 per square meter/year
[*]for houses up to 10 years old: €6 per square meter/year
[*]for houses up to 15 years old: €7.50 per square meter/year
[*]for houses from the 16th year: €10 per square meter/year

The Association of Private Builders (Verband Privater Bauherren) recommends €1/m².

Personally, I think you should save more, since building prices continue to rise, as do renovation and modernization costs. With €1.50/m² you would be well positioned.

Hello Otto friend,

It is fully basemented and has 300 sqm living space (2x 110 + 80). ... The rental income would be 2x 450 euros.

Where is the object of desire located? €450.00 rent per month for 110 sqm seems quite low to me....

Rhenish greetings

thanks for the quick good answers! i’ll try to clarify a few things.

: the 360 per month comes from the fact that we both work at a company with a very good canteen and have breakfast and lunch during the week. this is deducted directly from the salary and is already included in my net figures here. so we only have to pay extra for dinner and weekends saturday/sunday. currently, we feel more like we live quite well and spend rather too much, instead of being "artists" as you say but sure, with a baby that changes again. of course my wife would get parental allowance, but as far as I know only for 1 year. if possible, we wouldn’t "give away" the child until it can at least speak and tell us what it experienced with strangers…

: 1. ok thanks, i’ll check that out! 2. the cold rent is WAY too low. the rent index shows 6.50 to 7 euros per sqm ... those are the sins of the previous owner. however, it has to be said that the tenants have always kept the house in good condition and took care of everything inside and around the house. we would raise the rents step by step, but the rent brake applies here too and more than 30 euros each year (15% over 3 years thanks to the rent brake...) are not possible until a tenant change (which we actually don’t hope for since the tenants are very nice people). 3. thanks! 4. we would put aside about 400 per month, i.e. just under 5,000 per year, so we are within or above these recommendations.

: well, the house is located in the area around freiburg in the south near the swiss border ... the rents are way too low, we know that ....

Hello,

questions upon questions. It is very good that you are thinking about the possibility of having children. Children cost money and the child benefit does not even come close to covering the costs (nursery / daycare) at least in the first years of life. In addition, there is also the loss of income and in your case possibly rental losses associated with costs (eviction and possibly renovating).

You should definitely reconsider that. Banks review retrospectively and the current situation. Never prospectively, not even 10 years into the future. For you, it would also apply to build reserves in case of rental loss. Whether a combination with a building savings contract is good for renting out, I don’t know. There are also (meager) interest earnings on the savings portion.