Evaluation of Real Estate Financing for Existing Property

Hello everyone,

happy new year to start with.
We have the chance to buy the house we are living in. It is a house from 2002, currently occupied by us.

I am stunned by the real estate prices asked for in other parts of Germany.

We are in the province of Saxony-Anhalt and can take over this house.

Key data:
Living space: 206 sqm
Plot: 580 sqm

As mentioned, the house is from 2002 and in good condition, but minor work is necessary and we would like to renovate the driveway and the bathroom. Since my wife has been working full-time only since last year (previously studying, teacher training, parental leave), our equity is still very low because I was the sole earner for a long time.

We have a household net income of about €6,250 including child benefit (1 child) and currently need about €2,500 per month including rent for the house (€680).

For the project, we have now requested a loan of €230,000. This also includes a budget for renovations.

The additional costs (€14,000) will be covered from our equity.

We have received the following offer:

Amount: €230,000
Monthly installment €800
Fixed interest period 10 years (no longer was possible)
Nominal interest rate 1.09%
Term just under 28 years, so before our retirement. (33 & 35 years old)

We deliberately waived special repayment options because we want to modernize gradually and save at the same time, so that after the fixed interest period about €50,000 can be repaid so that only €100,000 remain. The offer is from the local savings bank.

I consider this a solid concept. But I am an amateur. Is there perhaps any input on this?

I know more equity would be better for the conditions, but the house is to be sold NOW, we save the move and the real estate agent.
Regards.

Find it good, affordable, and the income fits.

I think that's good too! The rate is insanely low. Ours is more than twice as high with significantly less income and we still have prepayment planned. That's why I would personally take the prepayment option with you. With a build year of 2002, there can't be that much that needs renovating, right?

Well, the house was rented out for 18 years. In total, there are two apartments that we will combine.

Because it was built as a capital investment, the equipment is kept quite simple. We want to modernize it a bit. The bathroom is simple, we want to have the outdoor areas properly done, a fireplace would be nice, etc.

Since we cannot yet predict exactly how things will develop overall, we prefer to skip the special repayment option, keep a monthly cushion, and set aside money in a short-term available form, e.g. ETF or similar, to be able to repay a larger portion directly after 10 years.

The offer is calculated with a 3.08% repayment rate, which is quite okay.

Addendum: We never really intended to buy, but everything fits together here so far. And we wanted the rate not to be much higher than the current rent.

if the house is the right one for you based on the floor plan, and would still fit in 20 years, then buy it

Is the house from the floor plan the right one for you, and would it still fit in 20 years, then buy it

It definitely is.
It is not spectacular, but sensibly laid out. Overall even a bit large, but part of the apartment upstairs we want to convert into a guest apartment, so the space will not be actively used at first. Also, having a room as a storage room makes sense since we don’t have a basement. That would relieve the small utility room on the ground floor ;)

If necessary, the second apartment can also be rented out again if it turns out to be too big in the long run.
But overall it fits our life plan!

Location (village, directly at the forest, next larger town 8 km away) and size also make it easy to sell again if needed.