Experiences buying a house without equity?

Hello,

we are a married couple from NRW and have been considering for some time buying a house in our current place of residence. Unfortunately, our considerations and the start of our careers coincided with the rising interest rates. And now we find ourselves in a dilemma, where we are looking forward to your input.

In brief: no significant equity, income in a fairly good range (wife working part-time), 1 child, semi-detached house on a leasehold property for 470,000 €. Offered loan installment 2250 € and the question: do we dare to do it or do we make ourselves unhappy?

General about you:

[*]Who are you? Married couple from NRW (Cologne/Bonn area)
[*]How old are you? 31 + 32
[*]Do you have children? Yes, one.
[*]Are more children planned? No more planned
[*]What do you do professionally? Civil servants for life
[*]How many hours do you work? He full-time, she just under 60%

Income and asset situation:

[*]What income do you have (gross/net)? 5800€ net, from which 850€ private health insurance is deducted… from summer 6200€
[*]How much child benefit do you receive? 250€
[*]How much equity do you have? 10,000 for notary and land registry + just under 10,000€ for flooring and walls

Expense situation:
Expenses that are already included in other items can of course be omitted. This list is not exhaustive and can be expanded or summarized as desired. Please make sure to state all costs monthly, even if they only occur annually!

Housing costs:

[*]current cold rent: 950€
[*]current warm rent: 1200€
[*]electricity: 100€
[*]phone, internet, mobile: 60€

Mobility costs:

[*]monthly ticket for bus and train (also for the child!): 50€
[*]car insurance: 80€
[*]fuel approx. 250€

Insurance costs:

[*]private health insurance (also additional health insurance, daily sickness allowance etc.): see above approx. 850€
[*]liability insurance (also pets): 75€ annually
[*]term life insurance: 500€ annually
[*]disability insurance: 145€ monthly
[*]accident insurance 55€ annually
[*]household insurance 70€ annually

Living costs:

[*]groceries
[*]restaurant costs
[*]personal care/drugstore
[*]pets (food, vet, medication, stable costs)
[*]medication
[*]clothing
[*]furniture
[*]daycare/school fees (and meal money)
[*]tutoring
[*]school supplies and books
[*]club fees/gym
[*]babysitter
[*]toys
[*]cleaning
[*]TV/video/audio/CDs/DVDs
[*]tickets (football, cinema, concerts etc...)
[*]donations
[*]other

Savings:

[*]vacation
[*]house
[*]retirement provision
[*]hobbies/gifts
[*]other

Income and expense totals:

[*]total income: 6050€, from summer 6450€
[*]current fixed expenses total: approx. 3050€

General about the property:

[*]How big is the land? 308 sqm, leasehold!
[*]New build, old building (year built), house type? New build semi-detached house
[*]Garages? No
[*]How big is the house? (living area / usable area) 138 sqm living area, 28 sqm usable area

Construction or purchase costs:

[*]Purchase price: 470,000€
[*]Leasehold: 170€ monthly for the first ten years, then 340€
[*]Incidental purchase costs (notary, court, property transfer tax, broker): 40,000

Necessary loan information:
We have the following financing offer (35 years term, unfortunately only 10 years fixed interest on all loans)
- kfw 300 / 0.86% / 170,000€ / 480€
- kfw 124 / 3.78% / 100,000€ / 441€
- annuity loan / 4.11% / 224,000€ / 1327€

That makes a total monthly installment of 2249 €, plus the leasehold.

I already have a suspicion where the advice in this forum will point and I look forward to your input.

Best regards and many thanks!

I already have a suspicion about where the advice in this forum will lead and look forward to your input.

Very tight panties - with Erbbacht 43% of net income (after PKV). Common opinion: Clearly too much. Additional risk in the context of follow-up financing - what if interest rates then rise to 5-6%? But mathematically feasible (however, we would not finance you, as the financing in relation to the property security is too high - about 130% of the loan-to-value), but not feasible for most banks, as there is too little equity or too much financing.

To be honest, I am always a bit surprised by the threads "can we afford this". Everyone in the forum has different needs to shape their life and consequently requires more or less money for living expenses. Only you alone can answer the question of how comfortable it is to live on the income with the future expenses. Why not just try it out? Set up a standing order to transfer €2,600 monthly (€2,249 loan installment plus €170 ground lease plus €181 buffer for future expenses for the numerous things to design around the house) to a savings account, and if in a year there is €31,200 on it, you will know whether you want to afford it. Apart from that, you have already built up some equity...

p.s.: o.k. you may deduct the cold rent from the savings rate, but higher additional costs could come with owning a property.

The question is whether it is a developer house where the price is fixed because the developer bears the incidental construction costs. Then it also applies that the property transfer tax must be paid. If there are insurance costs for mobility, then you must also include inspection, TÜV, and new acquisition.

However, it would be a no-go with "our" banks if you have no equity in a leasehold house. We ourselves have a leasehold property and from what we know, low equity (under 20%?) was a problem for the banks, at least during the low-interest period.

2 civil servants in their early 30s with 5,800 EUR net. Civil servants are actually the only professional group where one can confidently expect a steadily increasing net income and, in addition, a absolutely sufficient pension is guaranteed.

Where are the 5-6% interest rates supposed to come from in 10, 15 years? We currently have 3%, and that is already causing the worst recession in the construction sector in 20 years.

If you can't do it, no one can. You just must not lose your head and, following the motto "You only build once," believe you have to put up a villa that outshines Dieter Bohlen.

One shouldn't approach such things with the motto:
If it’s not a Mercedes, then I don’t want a car at all...