Construction financing purchase or new build

Hello everyone,

my wife and I are planning to buy or build a house next year. Preferably, it should be an existing property. Given the current prices of existing properties, I am now calculating whether a new build might be more worthwhile. Here are the key data: I am in my early 30s, my wife is in her late 20s. We have two 1-year-old children. Our net income is currently about €3000 without special payments. This will remain the same after parental leave ( [Kitagebühren] have already been deducted). We currently pay around €900 warm rent, while saving about €500 monthly. About a year ago we took out two [Bausparverträge] with [Wohnriester]. One for €50,000 and one for €20,000 in order to get the maximum subsidy. Unfortunately, equity capital is no longer available due to the wedding, move, and birth. The plan is to buy/build a house with a total value of max. €200,000 with a monthly rate of about €800. My financing plan looks as follows:

€50,000 KFW
€70,000 [Bausparverträge] (possibly also a bank loan)
€80,000 bank

Property costs house purchase:

Property including incidental costs approx. €150k - €180k
Renovation approx. €30k - €10k

About €10k should remain as a financing reserve in case something unforeseen happens.

I am only just starting to deal with the topic of new building, so I have no precise ideas there yet.

Plot approx. 700 m2 developed €40k
House 5 rooms approx. €130k
Additional building costs approx. €20k
Financing reserve €10k

I would be happy if someone could give me tips on financing and the topic of new building.

Thanks in advance

Regards Tratirol

Hello,
first of all, a warm welcome to the forum.
My first question is, after how many years do you want to be finished paying off?
Secondly, I think that Wohnriester was not the best idea. (personal opinion - it is simply too unpredictable)
Third, a new build with your financial situation probably won't work out. (20€ ancillary construction costs are set way too low) and since 200K is your limit, a new build is probably out of the question. And then I come to the fourth point, which is that I believe renovating a complete house will cost more than 30K. Unless it is only 5 years old and everything is still very new. But since I assume from your property wish including ancillary costs of 180K that it is rather a house from the 80s to early 90s, more money will be needed for renovation (refurbishment) than you imagine.
Sorry, this may sound harsh now, but I believe this won't work out. Unless you want to live on a construction site for the next 30 years. Better wait a little longer and set money aside and approach the house purchase/house construction project well planned and relaxed in a few years.

Never say never - but what do you spend the remaining 1600 € per month on? 800 € might currently even be enough for a house - however, in the end (e.g. after 15 years) you will still have a mountain of debt and the bubble will burst. Your house price is set very low - it would mean that you can build for 1000 € / sqm. The additional costs are disgusting beasts as well - gas, water, electricity alone gladly consume 7 T€. Wastewater another 4 T€. Work-related costs another 3-4 T€ - leaving 5 for building permit (~600 €), land register entry for the mortgage (1.5 T€), kitchen (4 T€), carport (1 T€), access road and other costs, etc. etc... For 130 sqm - a building expert might set it up better - I would personally calculate rather 200-210 T€ + 40 T€ land even with simple equipment including additional costs - but these are also affordable for you if you can live disciplined - only the question is whether you want to subordinate everything to the house dream.

With the new building, your proposed prices probably won't work. Nevertheless, there are of course basically houses from the 80s/90s (I don't know your prices in your area), which are in good condition and require little investment, if you can come to terms with one thing or another. And I speak from experience - I once bought a house from the 70s, which was constantly modernized.

First of all, thank you for the quick responses.
Tendentially, we are leaning towards an existing property. The consideration to possibly build new came from the fact that prices in the Hanover surrounding area have risen significantly in the last 2 years.
The goal is to pay off the house in 25 years, then I would be 58 and there would still be a 7-year buffer for all eventualities.
Regarding the Riester contracts, I am considering saving alongside to then include them in the financing after 15 years. For the 4 of us, that would be about €15,000 in government subsidies in 15 years.
I have consciously not gone to the maximum financing limit; according to 2 banks, we would also get a loan of €280,000 - €300,000. However, it should be paid off no later than in 25 years. If the renovation or the new build now unexpectedly costs €20,000 more, it is not quite as serious as if I had gone to the maximum limit. I also plan to work with special repayments, as I receive about €3,000-€4,000 in special payments per year. Currently, we are still paying about €400 monthly for car and kitchen, these items will be paid off by the end of the year. So there would still be room for the monthly rates for the house. A monthly rate of €1,000 plus additional costs and €2/m² per month for reserves would certainly still be possible. I do not want us to overextend ourselves and not be able to afford it in the end. For this reason, I set the price with about €200,000 so low. I have had too many negative experiences in family and friends circle.

Regards

However you do it - make sure you gather at least 10% equity before you start - that makes a big difference over a 25-year term! If applicable, try to finance with a bank that considers Kfw as subordinated - then you virtually have 50,000 euros in equity (only on paper, of course). The N-Bank (and thus every bank based in Lower Saxony - to my knowledge) does not do this - but there are supraregional direct banks that do.