Construction financing, construction costs - will this work?

Hello everyone,

after reading up a bit here and being impressed by the expertise, I would like to present our project and ask for your opinion.

Since we have a plot of land of 600 sqm available, we recently decided to start building our nest.

We are both employees. My wife has a permanent contract, I am still on a fixed-term contract until the end of 2017 due to a job change and - if everything stays the same - will then be taken on with a permanent contract. Our current household net income is 4400€ and is almost evenly split. At the planned start of construction (assuming the permanent contract), it would be about 4550€.

So far, we have not been particularly frugal. The saved equity capital is 10,000€ and is basically our own reserve. Our new savings plan foresees setting aside 1000€ per month with the following expenses:

Monthly rent including utilities: 800€ (70 sqm - much too small)
Other fixed expenses (electricity, insurance, telephone, mobile): 300€
Public transport ticket: 175€
Fuel: 150€
Groceries: 400€
Pension insurance: 200€

= 2025 €

That means in theory we have 2375 € left each month.

By the start of construction, the equity capital could thus be at least 20,000€.

The plot is valued at 170€ per sqm, about 102,000€.

In addition, own work worth 30,000€ is planned.

Our little house should have a living area of 140-150 sqm + basement. Therefore, I estimate about 350,000€. Is that a realistic cost estimate?

The next point of my question naturally concerns the monthly burden. Since we are planning to have children sooner or later, we expect to have a total of about 24 months in which my wife will earn only 65%.

This could still be adjusted with a raise after a promotion on my side, but it is not a figure I want to count on. Since our fixed costs would increase by about 200€ anyway due to the new place of residence, I actually do not want to pay more than 1000€ monthly repayment in this phase of life.

The question that ultimately remains is:

Is it possible to finance 350,000€ with 1000€ monthly over the next 40 years?

I would be very happy to receive an answer as well as a realistic assessment.

Best regards
JuKa

If you mean 350k€ for the cost positions 300 and 400 according to [DIN276] and do not mean everything else like ancillary building costs, outdoor facilities, etc., for a slightly better equipment, then 350k€ (without land) is enough for you.

Where do the numbers come from? Who calculated something for you? What are these own contributions of 30000?

I would say: good salary, but no equity, as you yourselves know.
Saving 2000€/month for 3 years results in good equity. 20000 is almost nothing, actually results rather in a negative balance.

I also find the planned rate of 1000€ much too low.

The property is equity of €100,000. The €350,000 should only be allocated for the house? There will certainly be additional incidental costs for you,

Your saving rate given your salary (even with the low rent) and without children is really terrible. No wonder you wish for a saving rate of 1000€. Any mortgage calculator would spit out a repayment of around 1,x% and a term of about 45 years for you. Such a thing is not desirable in the slightest.

As some have already written, the house price is/can be approximately realistic. But you really have to adjust the rest. Are you aware that with the loan amount you have to pay at least 1550€ (fixed interest rate for 20 years) for repayment, interest, and additional costs?

As you yourself have already stated, children are supposed to come and then parental leave is your least financial problem because it is calculable. I don't know many women who go to work full-time after 1-2 children, only when the children are older (from about 9 years upwards). Such a daycare is also not cheap if the woman wants to work part-time.

The equity is completely sufficient because of the land. But you need to get your expenses under control. The statement "we now intend to save 1000€" is not enough. 1000€ is roughly what you will later pay more for the house.

With that, I can answer your last question with a clear no.

Morning ✌

Thanks first of all for your answers. You are absolutely right, our savings rate has been really shitty so far. That was mainly because I studied for too long and didn’t save anything, and when I started earning, I earned alone for a year. When we finally both earned, we got married and treated ourselves way too much.

For next year, however, I want to step on the gas and keep track of it. If necessary, we’ll wait another year; we’re not in a hurry to have children and the plot won’t run away.

I’m coming to the construction costs because we obtained two quotes just to get a feel for the prices.

DIY work is planned, for example, for electrical work (because there’s an electrician in the family), insulation, floor coverings, and landscaping—most of the paving stones are already on site.

I researched again:

With a net loan amount of €350,800 and a fixed interest rate for 20 years with a repayment rate of 2%, we would be at €1,131 monthly.

Including additional costs, about €1,500, roughly double what we pay now. And at the end of the fixed interest period still a remaining debt of €180,000.

That would be 33% of our net income based on income levels from August 2018.

But we also have longer commutes which means more fuel and more wear and tear, thus not an insignificant factor. Financially, the only relief might be the somewhat cheaper prices for childcare.

Now I could factor in that you earn more over the years and also inherit something. But I don’t want to; I’d rather calculate with the worst case. Therefore, more equity must come in to keep the installments low. It could also be that someone becomes unemployed or ill. You also have to build up reserves with a house and cars. And you still want to be able to live, so that there won’t be arguments later.

It’s really not an easy decision.

Do you have any experience with €1,500 monthly fixed expenses and a similar income ratio?

Best regards