Construction financing: Is building a house possible? Please provide an assessment

Hello!

Here is a brief overview:

Ideal concept for the house:

We have simple requirements, do not want a villa, a Japanese garden, or a pool:

- Fully basement

- 120-140 sqm living space

- 400-500 sqm flat plot

- Garden area (play lawn)

- Location: rural in Enzkreis

Net household income

He: €1,900 (31, permanently employed)

She: €3,900 (31, civil servant)

Total income: €5,800

Costs

Cold rent: €990

Additional costs: €350

Groceries: €250

Private health insurance (she): €250

Leisure, hobbies, sports: €220

Internet, broadcasting fee: €50

Car insurance: €100

Car installment: €370 (paid off from 2021, €13,000 outstanding)

Fuel: €400

Mobile phone: €40

Pets: €30

Total costs: €3,050

Monthly “disposable” amount: €2,750

Equity capital: €10,000

Since we have only recently been dual earners, we can only start saving money properly now. I estimate that by the end of this year we can save about €28,000 in equity capital. We still have to move this year, so we will save less than planned this year.

Idea, plan:

We want to buy a home in the next few years. We currently live near Stuttgart but want to return to our home region and build in Enzkreis. As a rough timeframe, we have in mind a construction start between 2021 and 2023.

Our current net household income is €5,800. My wife’s salary will increase by about €200 gross every 3 years until she reaches the maximum level. We have no children but want some in the near future. I am aware that this decision will have a significant impact on financing. Considering the salary increases (also for me) and bonuses, assuming full-time employment, we will have a net income of about €6,400 in 2-3 years.

If we look at prices in BaWü, especially in our desired region, we estimate the total costs (house, land, additional costs) for a turnkey new build to be roughly €500,000-550,000. And yes, it does not get cheaper! BaWü has become an extremely expensive location, even in the most remote village. Used properties are currently not an option for us because prices in our region are completely exaggerated and hardly differ from those of a new build.

Given our income and the plan to have 1 to max 2 children in the future (before the age of 36), I ask myself how much house we can afford.

I have practically no knowledge about construction financing and am just starting my research on this topic. Because I want to avoid disappointments, I kindly ask for your support to get an assessment of our situation.

Thank you very much for your time!

What do the plots cost there? The salary is just "unfavorably" distributed.

The salary is just "unfavorably" distributed.

Why? Men can also take parental leave.

How much do the plots cost there? The salary is just "unfavorably" distributed.

According to my previous research, all included from €100,000-300,000. On average about +/- €200,000.

Unfavorable indeed, if my wife wants to take parental leave. But I could do that in principle as well.

Building will "in a few years" definitely become more expensive. The two main factors are the building plot price and the house price. Both tend to become unpleasantly more expensive over time. Building plots in BW are not really cheap (unless in a village without infrastructure - but no one really wants to go there). Equity is very modest; it would not even be enough for a year’s installment in the area of house construction. The income is actually good. Now one would have to find a smart approach. One such approach could be to first look for a building plot and secure it: then at least one big factor affected by rising prices would be taken out of the race (from the time of purchase). The overall question is just whether a bank will cooperate (with good income but low equity). The mentioned total price I consider possible but tight (already today). With a construction cost increase of 4% (let’s also assume that for the building plot price increase and the other costs) that would result in an annual increase of €20,000. Meaning: something that costs €500,000 today costs €560,000 in 3 years. This is not just theoretical, but the normal madness when it comes to house building. Of course, one can restrict oneself - but everything has its limits somewhere. Possibly waiving a basement would be an option (in return somewhat more m2 on the ground floor/upper floor): but that also depends on the building plot. Conclusion: From today’s perspective, equity is clearly too low.

What do you mean you want to buy a house? For 3 years and then move and build?

Yes, the salary is really unfavorable, and it's not just about parental leave but the time afterward. Your wife will probably go part-time, right? That means a loss of income, which is somewhat compensated by shifting tax brackets, but it is a loss of income combined with the costs of children...

You should be aware of that. There are various calculators regarding income where you can simulate your income and ask yourself if you want that.

What happens when you move with the jobs? Do you have to commute? Does it also cost time and money?