Evaluation of new construction financing

Hello,

we have reserved a plot of land with a municipality and planned a house with a general contractor and have now received an offer from the bank and are unsure whether we might be overextending ourselves.

About us:
He: 34 years old, €3300 net, permanent employment
She: 32 years old, €900 net, temporary employment

Children:
1 daughter, another child is planned in the near future

Equity:
€60,000 "liquid"
€8,000 in investments

We want to use €45,000.

Currently, we live in rented accommodation with the following expenses:
€1,100 including heating
€55 electricity
€180 insurance
€70 telephone/internet/mobile
€400 car (fuel, tax, and small reserves)
€400-500 groceries
€100 canteen
€400-500 miscellaneous (leisure, clothing, ...)
€30 child savings plan
€50-100 household goods/drugstore

The remainder we currently deposit into a daily allowance account.

No ongoing loans.

Total construction costs are estimated at €400,000 (including ground/walls in own work, but excluding kitchen).
The financing amount is therefore €355,000.

We have set a maximum installment of €1,250.

The offer we received from the bank:

Component 1:
€305,000 with 1.88% repayment (€1,052) and interest of 2.26% and a term of 35 years, with a fixed interest period of 20 years.
Component 2:
KFW 124:
€50,000 with 3.51% repayment (€205) and interest of 1.4% and a term of 25 years, with a fixed interest period of 10 years.

Somehow it seems tight to us. On the one hand, we will both be retired by the time it mathematically ends. If the house construction becomes somewhat more expensive than planned, there is little room to maneuver in terms of both duration and installment.

Thank you very much for your effort.

Regarding the conditions, I can't say, but I think it makes sense to choose a fixed term of 20 years.
You also still have the [Sondertilgungsoption] (?)

Have you obtained other offers from different banks? We were able to "play" the banks nicely against each other and ended up significantly cheaper than with the first offer.

If you are unsure about the house construction costs, ask here in the corresponding [UNterforum] whether the amount is appropriate or chosen too low.

We took out a similar amount but pay around 1400€ monthly. We couldn't go any lower. However, we are also servicing a [Bausparvertrag] in parallel.

If you are unsure about the house construction costs, ask here in the relevant subforum whether it fits or if the amount was chosen too tight.

I meant by unsure the financial framework and the purely calculative end. There is little room for maneuver?

Somehow it feels tight to us.

Yes, it’s tight. Now, there is no law of nature that you have to be finished by retirement. You are allowed to take longer (the federal government may see it differently, but never mind, you have an offer from a bank on hand).

I would ask: How certain are the construction costs? What is included, what is not? Are you "frugal" with the possible sampling? How about the outdoor facilities? High demands, low demands?

Will you, when the second child is here and a bit older, probably have two stable incomes again?

(I’m not expecting answers now, but these are the questions running through my mind...).

We were able to nicely "play" the banks against each other and thus came out significantly cheaper than with the first offer.

Nice that it was like that for you. It wasn’t like that for us. But that was also a phase of rising interest rates. We have that again now. And the loan-to-value ratio and the creditworthiness are not that great now either. So, is there much negotiation potential here? Still, of course, one should obtain several offers!

We are currently also in the financing planning phase or have completed it last week. We have had very different experiences. Since we are currently at an age where friends and acquaintances are also building, the discussions about banks and their financing were quite confusing. I somewhat feel that if a bank really wants a financing deal, there are special conditions everywhere that go beyond the "fixed interest rate." We have the nice situation of financing with >50% equity and significantly higher income.
In our case, the situation showed that the large credit brokers offered the worst deals and the "house banks" the best :-) Somehow an upside-down world. However, even within the banks, the offered interest rates were very different.

We had the following (best) interest rates on the table:
15 years fixed interest: 1.4%
20 years fixed interest: 1.7% (Even less would have been possible here)
25 years fixed interest: 1.8%
30 years fixed interest: 1.9%

Special options such as special repayment, the right to re-disbursement of special repayments, and >1.5 years of interest-free availability period were included.