Financial planning for new construction with good income and little equity

Hello everyone!

we (both 34 years old, no children - desire for children ideally after building a house, in 2-3 years) are currently looking at what is realistic in our income situation:

Basic data:
- permanently employed, both full-time
- net as base salary 3850 & 1650 => 5500
- company car and job ticket, so no mobility costs except for monetary benefits
- cold rent 1000 EUR
- additional costs 500 EUR
- telecommunications 120 EUR
- GEZ 38 EUR
- insurances: 100 EUR
- electricity 73 EUR
- monthly 1000 EUR savings for building savings contract and ETF fund.
- the rest goes to living expenses, travel, etc.
- one-time payments per year would amount to about 8,000 EUR net additionally, I best do not consider these.

The change of mind to actively do something towards ownership honestly only came at the beginning of the year, before that there were other priorities (e.g. long-distance travel). Thus, saving only started recently, we currently have roughly 10,000 EUR in equity.
Now we are considering not to wait a few more years to save up a significant amount but to enter the game with the Building Energy Act, especially since we have received a fairly attractive offer from Town & Country house, in my opinion:
- city villa with 150m2, finished apart from floor coverings and wallpapers, including additional shower as special feature: 318,750 EUR
- plot from them at 52,000 EUR

On top of course purchase incidental costs and construction incidental costs (those not yet included in the basic offer of 318,750 EUR. Included are: soil survey, construction site setup, drainage)

Regarding construction incidental costs I am still waiting for the final calculation related to the specific plot, it is said to be between 40 and 60k.
Our hope is to end up at total costs excluding purchase incidental costs and outdoor facilities of about 420,000 EUR, which, I hope, could be realistic.
That a buffer is needed for fittings is also clear. The goal is a monthly loan payment with 1.2-1.5% repayment at 1,800-1,900 EUR (the developer calculates about 16,000 EUR muscle mortgage for floor coverings and wallpapering).

In your opinion is this realistic?

There is also the issue of low equity, even if we reach about 15,000-16,000 EUR by the time significant burden such as interest servicing sets in. From that, you have to do the mentioned floor coverings and co., buy the kitchen and above all - purchase incidental costs (especially land transfer tax), which, as I was informed, will probably apply to the entire construction project, 6% = Hessen.
Of course, none of this can be financed from the mentioned capital, so at least 40,000 EUR are probably still missing. And here I see 3 options:
- drop it and save
- include the amount in the financing request, moving towards 110% financing, with correspondingly modest conditions.
- take an installment loan for 10 years.

Thanks!

excl. incidental purchase costs

So almost €40,000 incidental purchase costs again and thus a total of approx. €460,000 overall costs (how you account for it or what is not yet included because it's the client's responsibility would need to be clarified).
With us, you would be out - your creditworthiness is too poor for that, as you need more credit than the house is worth (lending value for the bank +/- €380,000 with €460,000 financing). And someone still has to pay for a kitchen, a carport/garage/parking space, terrace, driveway, garden, etc.

Good morning!

In my opinion, a project like this with these conditions is feasible without children - with children certainly difficult...

The one net salary (probably from the man) is certainly very good and once you have children, that will also be very helpful!

However, in today's interest rate phase and with today's construction costs, even that will hardly be enough to repay the loan on time.

You are no longer 25 and thus, at mid-30s and without significant equity, you are really already at the limit to be able to pay off the house with an affordable rate by retirement.

I also consider 420k unrealistic... Since you have no equity and therefore have to finance everything, you will certainly have to add another 50k here - 420k will not be enough for you.

Additionally, you also have to think about the outdoor facilities, which you certainly will not want to leave "unfinished" for 10 years. Depending on the plot, this can quickly amount to between 30-80k.

Effectively, such a project will be well over 500k - you really have to calculate that!

I would currently not advise you to realize this project as it is - I also actually do not think you will get a loan for it from the bank.

For this project, I personally lack the imagination, even though I am more of a risk-taker: (1) Additional purchase costs (notary, property transfer tax, etc.) probably apply to the entire project and not just the land (since marketed together) (2) So far no savings with Double Income, no Kids (should be higher despite traveling) (3) Children planned in 2-3 years, exactly when the first installments are due; at least one salary will be lost here (apart from that, you should think carefully about postponing having children so long at your 34 years)

Conclusion: Stay away from it.

3800.-- is only a great salary for the location, estimated based on the land costs. Together with the second salary and for the house, it is little. If you do not raise additional security (parents' house) or more money (advance inheritance). Probably only a few banks do this and then with over 4% interest. A consumer loan for 30000.-- probably does not help much. If then a home savings contract that is not registered in the land register

Already stopped reading at netto 3850 & 1650 => 5500 without children but planned in 2-3 years & little equity, sorry