Evaluation of Construction Project / Credit Offer

So let's summarize.

For a 500,000 loan, there should be 200,000 gross income per year on the credit side. That means woe to anyone who is not among the top 5% earners in Germany. Repayment must be at 3, preferably 4%, regardless of how old the borrower is. Age does not matter, since the 30-year-old must have paid off their debts by age 45. There are no other options. Significant inheritance must be ignored. Commute and region can be disregarded. Logically, daycare places cost up to 1,500 euros per month in Munich; it will be similar in Saarland. Must!! And whether you drive 100 km one way and thus wear out your car or 5 km by bike is also irrelevant as long as the facts from [KeinHilfeKeineHilfe] are observed. Even if only one car is needed, this must be calculated. That would be even better. Every post from the OP had more substance than your generalized drivel.

A few helpful things were mentioned to you (OP) that you can now work with.

Best regards

Maximum 30% of net income for interest / repayment and additional costs. By that I do not mean 2% repayment but 3-4%. Assuming 1.5% interest, 3.5% repayment on 500k is 2083€ plus additional costs = 2,500€. Then you would need to make 8,300€ per month (bonus broken down). With 40% it’s 6,250€ net. But that’s after children. Including part-time.

So let's sum it up.

For a loan of 500,000, there should be a gross income of 200,000 per year on the credit side. That means, woe betide anyone who is not among the top 5% earners in Germany when building. Repayment must be at 3, preferably 4%, no matter how old the borrower is. Age doesn't matter, since the 30-year-old obviously has to have paid off their debts by the age of 45. There are no other options. Significant inheritance must be ignored. Commute and region are negligible. Logically, daycare places cost up to 1,500 euros per month in Munich; it will be similar in Saarland. Must!! And whether one drives 100 km one way thus wearing out their car or cycles 5 km is also irrelevant as long as the facts from KeinHilfeKeineHilfe are adhered to. Even if only one car is needed, the calculation must be done this way. That would be just wonderful. Every post from the OP contained more substance than your generalized drivel.

A few helpful things were mentioned to you (OP) that you can now work with.

Best regards

Sorry, I wouldn’t make a laughingstock out of the whole thing. The core statements were: not too high a ratio between debt service and income and as high repayment as possible? What’s wrong with that? Of course there are other ways. But there is indeed the risk that in 20 years the dream of living in rural areas will be almost worthless. Because cheap money creates housing where none is needed. By then at the latest everyone will look at each other with wide eyes wondering what they’ve been toiling for 20 years.

Sorry, I wouldn’t make a mockery out of the whole thing. The core statements were: not too high a ratio between debt service and income and as high a repayment as possible? What’s wrong with that? Of course, it can also be done differently. However, there is indeed the risk that in 20 years, housing dreams in rural areas are almost worthless. Because cheap money is creating housing where none is needed. At the latest then, everyone will look at each other with wide eyes wondering what they worked so hard for 20 years now.

Of course, there were also sensible contributions. I’m only criticizing one comment.

rural area is not equal to rural area

By the way, I heard the same argument almost 10 years ago. No matter if it’s urban/rural flight, economic and stock market crisis, or interest rate levels securing it. One may speculate, but it’s just speculation.

Net income cannot be the standard for such a calculation, can it? I have to include the expenses for this net income as well as the cost of living in the region, right?

Of course, net income alone is not enough. But if the standard is the expenses and other living costs, then I have to state that with 30k equity, nothing is left for you. Life changes or not, it either happens or it doesn’t.

As I said, your income is actually good, but equity is missing. You can only build with a buffer in reserve, which you don’t have. You want to pay 10k purchase ancillary costs, 25k for the kitchen... you are already negative and then come all the materials for DIY work and 100 things you hadn’t thought of or other special wishes. And believe me, those will come! You have enjoyed luxury so far, then you want that in the house too. “You only build once, but then properly.” I stand by it, no problem, you can easily refinance with the employee loan. At least for the kitchen.

Now to the somewhat provocative statement from HilfeHilfe:

Maximum 30% of net for interest / repayment and ancillary costs. By that I don’t mean 2% repayment but 3-4%. Let’s assume 1.5% interest, 3.5% repayment on 500k, that’s €2083 plus ancillary costs = €2500. Then you would need €8300 net per month (bonus factored down). At 40% it would be €6250 net. But that’s after children. Including part-time.

So I see the 8.3k net as a satirical comment. Anyway: I don’t think 40% of net is that wrong, but 3-4% repayment is exaggerated. I would set the repayment so that it’s definitely paid off by retirement. Maybe 2.5%. With a 15-year term according to the calculator, €1900 per month plus €400 ancillary costs plus €200 kitchen. That nicely comes to €2500 for the house alone. : Can you come to terms with such an amount? Is there enough left for living?

Counter-question to those who say our net income would not be sufficient for a project of this size: What do you consider as a sufficient net income for this?

If you can answer my previous question with yes and still have a small additional buffer for savings left, then the net income is sufficient.

Of course, our plan relies exclusively on contingencies, that’s simply how a plan and future outlook are, that will be the same for everyone else. Every plan is ultimately only as good as its implementation.

No, my plan was based on actual savings performance. Children already present, no ambitions to change jobs, enough equity saved over years. The goal of my plans was always to minimize risks in house building (renovation in my case). Everything tackled as realistically as possible and not based on hypotheses.

I want to make a nice comparison regarding net income:
Currently I have 15 km (one way) to work, however I currently have an offer for €3,900 net per month, but it’s 95 km (one way) away.

Now it gets strange again. You build a house to settle down. How can you simultaneously conduct job negotiations 100 km away? That €800 more net is not worth commuting two hours every day. Good luck with the DIY work after such a long day. That’s risk times ten again: the job, colleagues, or supervisors might be awful or you get dismissed during the probation period without reason.

Thank you very much for this contribution! I have indeed considered unsubscribing...
[..]
It’s about the manner and above all that here apparently 80% seem unable to read posts (but want to give tips to others regarding possible financing – how should that work if simply reading posts is obviously already a problem?)

No one wishes you any harm, we just want you to calculate a bit more cautiously and approach the matter more realistically.
After all, you were able to take valuable suggestions from 20%.

We financed 510k. 210k equity and another 55k in reserve as a buffer and for generously calculated new furniture.

Income She: 2100 EUR 60% 13 salaries He: 3600 EUR 80% 13 salaries 2x child benefits 560 EUR (as you’re from Saarland you will know where we work) Bonus approx. 8k + x

So our incomes are not much higher than yours, but I think it’s better: both work again, time with greatly reduced income is over, we also allowed ourselves a longer break after child 2, through the two part-time jobs there is comfortable potential for topping up. And the constellation is secure and not a simulation. We also consciously postponed the construction to this phase of life. Originally, we wanted to build 3 years ago, but a longer break after child 2 would not have been possible then. And I myself had to get used to the loan amount.

Yes, but you already have the same income in part-time with 2 children. The OP doesn’t have that yet.

These are exactly naive calculations to me, and I would also like to explain why....

Net income cannot be the benchmark for such a calculation; I have to include the expenses for this net income as well as the cost of living in the region, right?

I can earn €5,000 net in Munich and my regular workplace is 100 km (one way) away. On top of that, I don’t have a company phone, a job bike, etc., which significantly increases my expenses, but these are not considered in this xx% of net calculation.

If I have the same net income in a rather weak region, it can be worth significantly more, plus not too long a commute, a company phone that is not taxable (phone contract and new purchase can easily be calculated with €30-50 net per month), and so on.

Apart from the everyday costs (for example, in Saarland you can get a decent haircut for less than half the price compared to Munich).

Therefore, I consider a profit and loss account to be much more sensible and appropriate, as it covers all these points.

Of course, I agree with you there. However, what makes the huge difference is housing. Culture / food groceries / fuel are almost the same everywhere. Well, maybe childcare too. If you like to go out to bars in the evening, a cocktail costs €13 in Munich, probably €5.90 in Saarland. And yes, you can earn well without consuming much fuel. For example, I commute by train.