PurpleBee
2024-10-14 11:19:44
- #1
Hello everyone,
I would like to hear your objective opinion on our current situation and financing intention.
Property:
About us and our financial situation:
Household net income including child benefit is around 6,000 EUR (without bonuses). The income is expected to rise (except for parental leave). Our current fixed expenses (including groceries) are about 3,100 EUR, of which 1,250 EUR is rent (plus 100 EUR for electricity, public broadcasting fee, and DSL). Without housing costs, approximately 4,150 EUR would remain. Our current "variable" lifestyle costs amount to a (high) 1,800 EUR (pocket money, vacation savings, other shared expenses like gifts, dining out, furniture, etc.). Naturally, the question arises whether one wants to consume that much with a home of one’s own in the future. But assuming we keep this level, our maximum possible burden would be around 2,300 EUR.
Assets: (only) 30,000 EUR equity (for various reasons), may possibly get another 25-30,000 EUR from my parents to at least cover ancillary costs. No debts. It is noteworthy that I own a multi-family house with my sister (gift, usufruct by father as security), and my father (73) still owns another unencumbered multi-family house which he has offered as additional security (both valued >700,000 EUR each) and which (if all goes well) will eventually pass to my mother or the children.
With these premises, we have now received a first financing offer.
If I add 500-600 EUR ancillary costs (reserves, heating, etc.) per month, with 1% repayment we would be at 2,100 EUR. This would give us enough flexibility over the next 10 years if a second child arrives, and we could use surplus money as well as salary increases and bonuses either for special repayment or for renovations/modernizations. On the other hand, the interest rate risk in 10 years is not insignificant, and the term would also be an issue that we would have to solve. At the end of the day, it is already a 25-year-old house. Furthermore, our cash reserves would be completely used up with the purchase, meaning depending on the condition of the house this could immediately break us in the first years (new roof, facade, etc.). The 2% repayment would only be possible with bigger cuts together with the ancillary costs, and as soon as a second child arrives it would probably no longer be really sustainable. Moreover, hardly any reserves for other "cosmetic" work could be formed this way.
As a layman, all this doesn’t sound very promising. Sure, there are parents in the background and the two multi-family houses which one could (hopefully late) inherit someday, but besides the pledge these don’t help me at the moment. On the other hand, we have been watching the market a bit longer now, and this is really the first property that directly appealed to us in terms of location, equipment, and price. Even 50-year-old houses are being advertised for outrageous prices, and we do not dare to renovate an older property. Comparable turnkey new builds start at 650,000 EUR (pure construction costs), with special requests, ancillary costs, and kitchen you quickly reach 750,000 EUR, which we cannot currently afford. Equivalent apartments with a bit more space would cost us 500-600 EUR more per month. New condominiums (concrete example: 102 sqm, 4.5 rooms, 587,800 EUR outskirts) are not a real alternative for us at these prices and disadvantages (neighbors, etc.).
Of course, we could continue renting and save money. But for how long? And how will property prices develop? My fear is that we may save but prices will rise at the same rate and we will face the same situation in 5 years.
Is financing a 25-year-old house with 1% repayment even reasonable? Entering without reserves also seems very reckless to me. Maybe there is experience here on what kind of work can be expected on such a house. The gas heating is new. Or should we (if possible) finance more and proactively use it for occasional renovations?
I would appreciate any help and experiences.
I would like to hear your objective opinion on our current situation and financing intention.
Property:
[*]Suburban area of Stuttgart, S-Bahn
[*]Semi-detached house from 1999, 5 minutes walk to the city center
[*]130 sqm living space, 3 floors, 6 rooms, 300 sqm plot, carport
[*]Gas heating with solar thermal from 2024, no other modernizations, energy consumption certificate class C
[*]Purchase price: 530,000 EUR
[*]Condition looks well maintained according to the exposé, viewing pending.
About us and our financial situation:
[*]M31, 3,400 net (with bonuses around 3,800)
[*]F31, civil servant, 2,300 net (60%)
[*]16-month-old daughter
[*]Renting a modern 90 sqm apartment 15 minutes walk from the center
Household net income including child benefit is around 6,000 EUR (without bonuses). The income is expected to rise (except for parental leave). Our current fixed expenses (including groceries) are about 3,100 EUR, of which 1,250 EUR is rent (plus 100 EUR for electricity, public broadcasting fee, and DSL). Without housing costs, approximately 4,150 EUR would remain. Our current "variable" lifestyle costs amount to a (high) 1,800 EUR (pocket money, vacation savings, other shared expenses like gifts, dining out, furniture, etc.). Naturally, the question arises whether one wants to consume that much with a home of one’s own in the future. But assuming we keep this level, our maximum possible burden would be around 2,300 EUR.
Assets: (only) 30,000 EUR equity (for various reasons), may possibly get another 25-30,000 EUR from my parents to at least cover ancillary costs. No debts. It is noteworthy that I own a multi-family house with my sister (gift, usufruct by father as security), and my father (73) still owns another unencumbered multi-family house which he has offered as additional security (both valued >700,000 EUR each) and which (if all goes well) will eventually pass to my mother or the children.
With these premises, we have now received a first financing offer.
[*]530,000 EUR, 2.85%/2.91% nominal/effective interest rate, 10 years, 5% prepayment
[*]Additional pledge of my father’s multi-family house for 250,000 EUR
[*]1% repayment: installment at 1,700 EUR, leaving enough buffer for ancillary costs, reserves, and cosmetic things. Also affordable with a second child or illness (disability and occupational disability insurance available).
[*]2% repayment: installment at 2,200 EUR, but this would completely use up the free budget and ancillary costs would only be possible with lifestyle restrictions. Additional cosmetic expenses would definitely not be possible.
If I add 500-600 EUR ancillary costs (reserves, heating, etc.) per month, with 1% repayment we would be at 2,100 EUR. This would give us enough flexibility over the next 10 years if a second child arrives, and we could use surplus money as well as salary increases and bonuses either for special repayment or for renovations/modernizations. On the other hand, the interest rate risk in 10 years is not insignificant, and the term would also be an issue that we would have to solve. At the end of the day, it is already a 25-year-old house. Furthermore, our cash reserves would be completely used up with the purchase, meaning depending on the condition of the house this could immediately break us in the first years (new roof, facade, etc.). The 2% repayment would only be possible with bigger cuts together with the ancillary costs, and as soon as a second child arrives it would probably no longer be really sustainable. Moreover, hardly any reserves for other "cosmetic" work could be formed this way.
As a layman, all this doesn’t sound very promising. Sure, there are parents in the background and the two multi-family houses which one could (hopefully late) inherit someday, but besides the pledge these don’t help me at the moment. On the other hand, we have been watching the market a bit longer now, and this is really the first property that directly appealed to us in terms of location, equipment, and price. Even 50-year-old houses are being advertised for outrageous prices, and we do not dare to renovate an older property. Comparable turnkey new builds start at 650,000 EUR (pure construction costs), with special requests, ancillary costs, and kitchen you quickly reach 750,000 EUR, which we cannot currently afford. Equivalent apartments with a bit more space would cost us 500-600 EUR more per month. New condominiums (concrete example: 102 sqm, 4.5 rooms, 587,800 EUR outskirts) are not a real alternative for us at these prices and disadvantages (neighbors, etc.).
Of course, we could continue renting and save money. But for how long? And how will property prices develop? My fear is that we may save but prices will rise at the same rate and we will face the same situation in 5 years.
Is financing a 25-year-old house with 1% repayment even reasonable? Entering without reserves also seems very reckless to me. Maybe there is experience here on what kind of work can be expected on such a house. The gas heating is new. Or should we (if possible) finance more and proactively use it for occasional renovations?
I would appreciate any help and experiences.