Construction of a single-family house for a young family

Hello dear forum members.

We are planning to build a solid single-family house at the beginning of 2015.

Here is our situation:

Age man: 25
Age woman: 21
Children: 1 (2 years)

Salary man 2350€ (+ holiday and Christmas bonus, but I do not count this in (store manager in the grocery store)

Salary woman 670€ (in training) then approx. (2000 € but I am first calculating without)

Child benefits 184€

Income 3204€ (without Christmas and holiday bonus, which I spend on insurance)

_____________________________________________________________
Monthly expenses:

Rent 655€ warm

Electricity 55 €

Groceries + hygiene 500 €

Car 250€

GEZ 18 €

Phone/ Internet 35€

Insurance average 100€

Miscellaneous 150€

Credit (kitchen) 180 €

Total expenses: 1943€

Remaining: 1261€ monthly

Equity approx. 10,000€
Unfortunately, my car was stolen, so equity is so low because I had to get a new one. Received nothing from the insurance.

We aim for a loan installment of 1000 €/month. So that we can still go on vacation and not just work for the house. We want to do the exterior work ourselves, like the terrace. We want to do the screed work in the house ourselves (brother is self-employed). That means we want to tackle some things ourselves.
My questions:
What kind of bank would you recommend for financing?
What can I afford?
Is it even realistic for us?
And I would gladly accept tips from your side.

Thank you in advance for your assessment.

Best regards

With a payment of €1,000 and an assumed interest rate of 3% as well as an initial repayment of 1%, a loan of €300,000 would be possible. However, you would be paying for 46 years. With a 2% repayment, it would be a loan of €240,000 and you would pay for 30 years.

I don't know how expensive the plots of land are where you are, but I think €300,000 might be underestimated. Therefore, I would say it is unrealistic.

Nevertheless, you could listen to what the house bank and independent brokers (Interhyp, Dr. Klein ...) say. You could also get information about funding (L-Bank!).

From now on, just consistently set aside €1,200 per month until your wife finishes her training. Then the situation will look different again!

By the way, I find €655 warm for an apartment relatively cheap. If possible, I would stay there for now.

I can only really agree with backbone23. Firstly, a total sum of €300,000 (if even that much is possible) is rather unrealistic. Your equity is basically zero in the end, since the €10,000 can't really even be considered a solid reserve. Your wife is still in training, which means the training allowance probably won't be taken into account. What if she isn't retained? Then she will also have a big zero. Child benefit should actually be left out as well, since it will be completely used up for the child.

Regarding your expenses, I only notice that your additional costs will certainly be higher with a house. Insurance premiums will be added (term life insurance, disability insurance if not yet existing, building insurance). What about daycare fees? That can be quite expensive.

You write that you are very young. Do you really want to commit and bind yourselves so much financially and geographically already? What about a second child, desired/planned or is family planning finished?

Be aware that this will probably be the biggest investment of your life, which should be well planned. At the moment, without equity and with your wife still in training, I do not see it as realistic and above all not sensible to build a house now. Wait until your wife/girlfriend has finished her training, has a secure job, and you have saved more equity. Then, in my opinion, you can start thinking about a house and consider building one.

I can only agree that your thought comes 2-3 years too early. I would wait for the training and save up some equity. Maybe an existing property would also work where you are financially better off

Hello,
I don’t see it quite so black, but it certainly needs to be well planned. Friends of mine also bought an MRH with zero equity, but their parents had to take out a mortgage on their house to provide the bank with sufficient security. In which region do you want to build?

We will probably pay just under €3000 per sqm, building in Hamburg on a large plot that cost €155,000 (we were lucky with that).

Above all, with new builds you have to plan for many additional costs that you didn’t consider beforehand – for us, the ancillary costs alone amount to €90,000 and the house isn’t finished yet ;-) because x things came up such as redesigning according to the authorities' specifications €15,000 more, bomb search €2500 more, soil air investigation €1000 more, utility connection costs suddenly at €20,000 instead of €10,000, overlooking a clause in the construction contract (financing guarantee) €2500 more etc... also you have to have reserves in case the construction doesn’t progress quickly enough and you might have to cover rent and loan payments at the same time because you can’t move in yet, as the time from purchasing the plot (and from then you already pay interest) until possible move-in can take a while (in our case about 1.5 years). The point about the additional insurances also applies, that’s another approx. €150 per month more. Try to gather what additional costs already occur to you, if you want I can also tell you what it ended up being for us...

Whether you will be taken on you can certainly assess better than we can here, so I don’t find it unrealistic to also calculate with your income.

I would recommend that you definitely have the construction contract reviewed by the Verbraucherzentrale or Verband Privater Bauherren or similar for pitfalls. Have everything you agree with the builder assured in writing (e.g. that you can spend the budget for doors wherever you want or what extra costs would arise for a possible ground replacement). A soil report for the plot might already make sense before the purchase (we did this to rule out that we would need a pile foundation, which often happens around here). Be aware that later special requests are charged triple.

With the banks, we got good offers from Debeka and a Volksbank. With 30 years fixed interest and also a very low monthly rate (€1800 for a two-family house of 250 sqm from which we rent one apartment as an additional source of income) and the possibility to pay high amounts annually as special repayments. But without the pressure that we have to do so. The motto here is: run from one bank to another with the offer and show them what others can do, then much more is possible!

I hope I could give you some tips :-) Otherwise maybe an existing property is really an alternative, it simply involves less risk. Tell me how you decided :-)