Feasibility and Assessment Financing Proposal (Terms)

Hello everyone,

my girlfriend and I plan to purchase a home. We have now found a very nice single-family house in terms of size/appearance/layout/features that meets our ideas and wishes.
A concrete financing plan was developed through a private "financing broker."

Before we approached the broker, we prepared a household budget for the last 2 years to know our exact expenses/income situation. To keep it simpler here, I will not list the individual items too granularly.

Here are the facts:

Income/Loan situation
No children, but one planned in the next 1 to 2 years.

She (27) = €1850 net (€100 of the gross salary goes into a pension insurance)
I/He (30) = €2950 net (times 13 salaries, but only 12 counted for financing)
[B]Total monthly income: €4800

Expenses[/B]
Housing/Rent: €850 + €200 ancillary costs (incl. GEZ) = €1120
Property insurance (annual premiums converted to months) = €130
Taxes and fees (car, gym, etc.) = €90
Living expenses (food, drugstore, gas, clothing, vacation, maintenance...) = €1560
Total monthly expenses: €2900

Available for discretionary spending = €1900

Purchase price of existing property
Purchase price: €325,000

Property transfer tax (5%): €16,250
Notary (2%): €6,500
Broker (5.95%): €19,338
=> Additional purchase costs: €42,088

Modernization costs (very good condition, requiring no modernization except paint, curtains, and walls (wallpaper, paint)) => approx. €2,500

[B]Equity[/B]
Due to repayments of BAföG, student loan, car, and because we have made very nice long-distance trips in the last three years (i.e., consumed):

=> €55,000
Of this, we want to cover the additional purchase costs and modernization costs and keep the rest as an emergency fund.

Financing plan
Desired installment/amortization is: €1200 per month
12 months interest-free availability period, since the property will only be available in 11 months.

If you compare the current rental and expense situation with the installment for the house purchase AND include all additional expenses (electricity, heating, insurance, etc.), there is roughly an additional burden of about €600 per month.

Financing offer
A classic annuity loan
Loan amount: €325,000
Interest rate: 2.22% (nominal) / 2.27% (effective)
Amortization: 2%
Fixed interest period: 15 years
12 months interest-free availability period

=> monthly installment = €1,142.92

Term (calculated): 34 years

QUESTION
We are now looking for an assessment/opinion on the feasibility and, of course, the evaluation of the actual financing. Are these good conditions...? Suggestions for improvement? => I will still request an offer for a 20-year fixed interest term and have the amortization raised to our desired rate of €1,200.

Thank you in advance and best regards
Ken.S

Hello Ken,

then I'll start:

You are young and your income currently fits. You have left yourselves a buffer. I currently see no problem in your financing.

The question that always arises quickly... family planning.

To what extent will your financial situation change, how much income will be lost? For how long? Can you manage that for so long? Is another child planned? Calculate that and discuss it openly.

The repayment is borderline for my taste. At the current interest rate level, that is the lower limit. More would be better, even though you are still young. Calculate how much outstanding debt remains after 15 years and what an interest rate change would then mean.

Conditions... You have 100% financing. Naturally, you won't get the best conditions with that. So probably okay.

This is definitely financeable given the conditions.

But what I don't like are the 2% minimum repayments. When I look at the numbers, you can easily afford an initial rate of €2,500. (1900€ + 850€ KM) Hopefully, the interest rate will drop a few tenths more (and start with a 1?)

How this rate is then divided, whether the contract includes 2-3 free repayment rate changes and/or a 5% special repayment option, is almost irrelevant. The main thing is that you go full throttle! As long as you can plan, then quickly reduce the loan-to-value ratio toward 60%. If something comes up later, it’s easier to handle.

In the ongoing costs, I miss €150/month/car as a reserve.

Thank you all for your answers! :-)

The question that always comes up quickly...family planning.

That is correct. That is why we set the rate relatively low (minimum repayment) to get through exactly the times of "parental leave" and after the parental leave. In the years when there is no child yet, or after the parental leave, you can make special payments through the 5% special repayment.
Because my girlfriend is an educator and works in a private institution, we are lucky that at least the health insurance contribution is practically eliminated.

But what I do not like are the 2% minimum repayments.
If I look at the numbers like that, you can easily afford an initial rate of €2,500. (1900€ + 850€ KM) Then hopefully the interest rate will drop by a few tenths (and start with a 1

As mentioned, we have set it that way to also get through parental leave and after parental leave. As long as there is no child, we have to push hard as you mentioned and use the 5% special repayment.

For the ongoing costs, I miss €150/month/car as a reserve.

Here I looked again at my detailed breakdown. You are right, I did not calculate with €150 per car, but with €80 per car. So with two cars, €160.... I will adjust it accordingly.