Desire for the house (but uncertainty)

Hello everyone,

I am new here and, like many other people, have questions or would like to hear some opinions.

My wife and I are considering buying or building a house. But since there are hardly any plots available, it would probably be an existing property. We have an appointment with the bank soon, but I wanted to gather some experience beforehand.

Living situation: We (both 29) live together with our 10-month-old daughter in a rented apartment. Initially, we considered buying this apartment, but the neighborhood is terrible and we realized that if we move, it should rather be a house with a small garden.

Financial situation: My income: about €3800 net (bonuses not included (annual average about €4300)) Wife: currently on parental leave with only €250 net (spread over 24 months) + child benefit. (afterwards probably a second child instead of working full-time) Equity capital: €20k "Security": €55k (The money is invested with my employer and is only available upon retirement or unemployment) therefore no really available capital.

We currently have about €1700 available after all expenses. Plus the cold rent of €600, we are then at €2300.

Why so little equity capital? We recently had to buy a new car and I have invested a lot of money in retirement provision in recent years. Of course, we have also “wasted” some more money.

Oh, and edit: Since we only moved two years ago, a lot of money went into furniture etc. The only advantage would be that almost nothing would have to be bought for a house. We also have a kitchen (high quality but simple kitchen unit).

Actually, I tend to accumulate more equity. On the other hand, current property interest rates are low and will they still be like that in 3 - 5 years? At the moment, the feeling is simply that the €600 rent is just being wasted, considering that the quality of life is rather poor with such neighbors.

Would you dare to buy a house under such circumstances? How high could a manageable loan be?

Thanks and regards.

Hello Efreet,

doesn't look bad at first.
Of course, it depends on the area in BW and the prices for existing properties.

You possibly want a second child.
Here you should consider whether your wife should at least go back to work for one year. Reason: As far as I remember, my wife once told me that with the "direct connection of the 2nd child," only the minimum rate is paid for parental allowance. (It may also be that I am wrong here)

Otherwise, I would calculate as follows:
2,300 p.m. - 300 euros for unforeseen expenses (e.g., see above) - 100 euros for reserves - 150 euros for ancillary house costs (+ your additional costs that you pay with the apartment) = 1,750 euros
(future childcare costs I have initially left out - you should ask about daycare fees in your area)

1,750 euros with an annuity (interest + repayment) of 6% corresponds to a loan amount of approx. 350,000 euros. At 6% annuity, you would be finished in approx. 23 - 25 years. (Maybe with a longer term you could also plan a lower annuity and take a higher loan).
You can directly plan the 20,000 for various incidental costs.

Now it depends (see introduction) - what do you get in your area for 350,000 euros?

Hi and first of all, thanks for the response.

As in many areas, the real estate market here is quite competitive. Especially the proximity to Switzerland has caused prices to rise.

Buying land and building is probably hardly possible for us. You quickly spend 150 - 200k just on the land. Existing properties that would suit us start at around 300k. There are also nice ones for 200k, but then you quickly have to spend at least 100k on renovations.

We don’t have very high demands (at least I think so). 120 (at most 140) m2 of living space and a garden (150 - 200 m2) are enough for us.

For us, a visit to the bank definitely comes first. At the moment, the market doesn’t really offer what we want, but you want to be prepared. The advantage is, of course, that we can save more money. The disadvantage is the fear of rising interest rates.

All in all, I think I would estimate around €1300 - €1400 that we could spend on the house. I’m always very cautious about this. I’m more someone who thinks “what if this - then that”. But if I were too pessimistic, it would never work out.

It’s just that I have NEVER bought anything on credit or installments (If you can’t pay cash, you can’t afford it). But with a house, it’s probably different :)

Good attitude - better to be a bit cautious.
With 1,400 euros, a loan of 280,000 according to the above calculation would be possible.
If necessary – if the property still needs/wants to be energetically renovated, a corresponding low-interest KFW loan would also be possible.
Price increases due to the proximity to Switzerland – I know that – you just have to replace Switzerland with Luxembourg :(.
In this context – do you work in Germany or Switzerland? If you work abroad, there are banks that do not grant loans (e.g. Ing-Diba).

At your age, you can also consider structuring the financing with a lower repayment rate. This allows for a higher financing amount (but please then with a long fixed interest period to avoid interest rate change risks). The contract should include options for special repayments as well as the possibility to change the repayment plan. This arrangement has the advantage that you can buy now and at a later time X (when your life situation fits) make special repayments or increase repayments.

Price increases due to proximity to Switzerland - I know that - you just have to replace Switzerland with Luxembourg :(.
In this context - do you work in Germany or Switzerland? If you work abroad, there are banks that do not grant loans (e.g. Ing-Diba).

Ah ok, I didn't know that, for example. I work in Switzerland.
I don't really understand it, but okay, that's how it is.

I have to read up on the KfW loan first.