Construction loan from the bank for house building without equity?

Hello everyone,

we are a young family with two children (38 years, 32 years, 6 years, 4 years) and often think about building a house someday.
especially now, when the interest rate is so low and everyone around is talking about it and has by now also built.

A big problem is that unfortunately we have no equity. That’s why we think no bank would give us a loan anyway.

About our situation:
My husband works for the municipal utilities and is paid according to a tariff, not much, but it can still be considered a secure job. There are regular tariff increases, and you move up salary levels regularly, and he receives a 13th monthly salary.
I have been working full-time for about 1.5 years with approx. 30 hours/week.
Together we earn 3200 EUR + 368 EUR child benefit = approx. 3600 EUR

We currently rent.
Monthly expenses (FIX):

[*]100sqm (built 2008) - 700 EUR cold rent + 200 EUR additional costs = 900 EUR
[*]Car installment = 200 EUR
[*]Insurances (Riester, BUZ, supplementary pension, ZVK, others) = 400 EUR

The rest is at our free disposal, i.e. living expenses, communication, petrol, clubs, etc. = 2100 EUR

My husband and I have lived together in one household for 14 years and have already gone through some ups and downs. Including times of unemployment and self-employment.
Since we both moved out early, we hardly managed to save anything. Whenever something was saved, it had to be used for furniture, cars. Also, we never earned much. When we moved in together, I had just started training. One of us always had a side job. Meanwhile, my husband has managed to get his specialist qualification and eventually his business economist qualification. During that time, our children were born.
Family planning is now complete and we both really enjoy working. As it is now, we are really doing well.

The desire for our own house is currently very strong. We know that a house financing would burden us more.
About five years ago we hit a low point, during which my father helped us with a private loan. We paid him about 500 EUR monthly. That means we are already used to paying 1400 EUR monthly and still getting by well. We lack nothing.

That’s why we never managed to build equity.

But how is it now? The interest is good. Would it be possible to build without equity?
Suppose we start building equity now, by the time something is built up, the interest rate will be high again.
Is the Riester pension counted as equity? Also the BUZ, from which a part is paid out as capital?

We have also checked our SCHUFA for our liquidity. It is absolutely clean. Only the car financing, which is still running, is registered.

We are hesitant to go to an advisor because we have no equity. That’s why I’m asking here in the forum. How do you assess it? Should we better stop dreaming?

Thank you very much,

Mel

Hello, my wife and I have just arranged our financing without any equity. My wife works part-time as a sales assistant at a real estate agent and earns 800 net in tax class 5. I am an electrical foreman employed and earn 2050 net. In addition, we receive child benefit for 2 children. Our second child was just born and my wife is on parental leave. Only our own contribution was counted as equity. However, we had to pay off our existing car loan. We wanted to do this anyway, but the financing would not have been possible with the loan. We received two loans of 50,000 from KfW and 130,000 from Ing-Diba through an independent financier. However, the condition for Ing-Diba was that we pay the 2000 property transfer tax and the 900 notary fees ourselves. And pay off the car loan with our previous savings. Oh, we are 28 and 25 years old.
Best regards

If 230,000 is enough to build a house for 4 people, you can do it that way. However, I don't see how that would work for Mel1980. You only have 3,000 € net. From that, you would have to cover living expenses for 4 people and pay off a loan.

You will probably need around 300,000 € including land to build new. For that, with 1% repayment, you would have to pay about 1,500 €. Additionally, there are 300 € incidental costs for the house. There is no room for annual vacations or special repayments. And with 1% repayment, you pay huge amounts to the bank over 40 years... that's not what you want.

We are hesitant to go to a consultant because we have no equity.

Hello Mel,

I also think it might not be easy for you. However, 1400 euros per month – if you can really pay that consistently for the next 30 years – is quite a significant amount. In my opinion, no one here in the forum can give you a reliable answer. You don’t need to be afraid to go to a consultant. No one will tear your head off! And certainly no one will laugh at you! Just don’t go to the consultant with the question “Can we afford a house?” but simply ask: “What do we need to do / save to be able to afford a house in a few years?” Then you would have a goal to work towards. And you can see whether the financial burden is manageable. And all of that is completely non-binding. You’re not taking any risk. In my opinion, the car loan will probably have to disappear first. How long is it still running? Can you increase the payments to get rid of it faster? Good luck! Micha :cool: PS: Where are you from? Sometimes countries / cities have additional funding opportunities – but even there a financial advisor can provide information!

Thank you for the previous answers.

I always think that time is slowly running out for us. In two years my husband will be 40. Can you still get such a high loan then!?

Assuming we manage to build enough equity in 5 years. Then the interest rate will be higher again, but we will have equity available. However, in these 5 years we will continue to pay 700 cold rent instead of putting that into our own home. I believe that we will be worse off then, especially because we are not taking advantage of the low interest rate now.

By the way, we live in the south of BaWü. The price per square meter for land here is about 250 to 300 EUR (!).

But now again to the "what can we afford."
As far as I can tell, we could already buy something used for 200,000 EUR, right? Even without equity.

As I said, with the rent and the installment to my dad, we have always been able to pay 1,400 EUR monthly in recent years, even though I earned less then. In the future, the salary will not be less, rather a bit more. Of course, you never know, but we assume that.

Who should one best go to first? The house bank? Or the real estate agent? Or directly to, for example, a prefabricated house company?

700€ cold rent + 500€ installment are but only 1200€. The car installment cannot be calculated, as there will certainly be several more car purchases in the next 20 years.