Evaluation of Construction Project / Credit Offer

Hello everyone,

We might be starting a house construction soon. The current framework conditions are as follows:

We are both 32 years old and have permanent and secure employment.

Me: €3,100 net per month (tax class 4) and about €5,500 net bonus payment p.a.
Her: €2,100 net per month (tax class 4) and about €4,000 net bonus payment p.a.

In total, that is €5,200 net per month and approx. €10,000 net bonus payment p.a. (theoretically available for special repayment).

We bring €30,000 in equity.

Our construction project:
The total project will amount to about €600,000, planning a Kfw 40+ house with corresponding photovoltaic system and electricity/heating costs together of perhaps €50 per month.

In addition to the equity, we will contribute additional personal services and items.

The personal services will be valued at about €30,000-40,000 and in addition, items (outdoor facilities, etc.) will add about the same amount.

Thus, equity of €100,000, which the bank may recognize as approx. €60,000-70,000.

The financing requirement would therefore be €500,000.

The plot of land will cost us about €100,000 including property transfer tax and notary fees; a broker is not included.

For the house, about €400,000 would be available.

According to our income and expense calculation, with a rate of €1,500 per month after deducting all costs and a maintenance reserve, €1,100 per month would still be completely free for us.

Since we are planning with KfW loans and a 40+ house, there would be a repayment grant of €30,000.
In addition, there is a Bafa grant for the geothermal heat pump which I would still factor in as a special repayment of €5,000.

The offer we have for this looks as follows:

10 years fixed interest period at 0.88% effective
15 years fixed interest period at 1.15% effective

We would tend to choose the offer with the 15 years fixed interest period.

Do you see this construction project as realistic?

Thank you very much for your help.

Did the bank really accept this somewhat opaque equity statement? I think at that scale they want to know exactly what is being done and how. €70,000 / €50 p.h. = 1,400 hours.

€500,000 with €5,000 net is quite a chunk. Don’t you want any more children?

Where did the savings rate go so far?
30,000 euros of equity with 5,200 euros + 10,000 euros p.a. does not seem particularly much to me.

Hello,

thank you very much for your comments.
The personal contribution is "only" €40,000, including tiling work for 180 sqm, wall work, and the outdoor area.
The remaining €30,000 is in an account.

Where did the savings rate go so far?
We haven’t been married for very long; until then, each of us had our own household, and we are also already fully equipped regarding furniture, etc.
Then there is a wine cellar worth xx.xxx€ and very expensive vacations.
Of course, we are aware that we will have to make significant compromises in this respect; sometimes we have taken vacations costing €20,000 per year...

We also want children; for this, we have already made a household calculation, with a surplus of about €700-800 per month after deducting all costs and maintenance reserves.

Well, but that will involve very, very large sacrifices. You're paying off just 2% with €1,500 if I roughly calculate that. Putting a bonus, which can sometimes be €0 (at least in my industry), into the special repayment is a bait used by banks. In reality, it looks different; special repayments are mostly misused. For example, we were glad to finally be able to blow our bonus after refinancing. When 1-2 children come, there will be only one topic at the kitchen table = money. A €70k muscle mortgage or, as it's called at our bank, "LuftikusEK" at €500k is rather dubious.

Honestly, I don't see a project of this volume with you, you should start smaller. In my opinion, at least 1-2 thousand monthly on the income side are missing for this endeavor.