Financing construction projects and cost calculation - What you need to consider

Hello everyone,

we are currently planning to build a house in 2022 and would like to draw on the forum's experience regarding financing. We are particularly interested in whether we have forgotten anything in our calculation or if our assumptions are completely off.
We are relatively confident about the construction costs – as we have just completed a very similar project within the family.

Total costs for construction + land: 600k

Current joint net income: 6600€ – for financing, however, I would like to base it on 5400€, since with a planned child my wife will go part-time and I do not want to include my variable salary component. Better safe than sorry. I also do not want to factor in a probably soon upcoming new position with correspondingly higher salary.

We have saved 300k in equity, of which we would like to keep 70k aside as security. Ergo, we want to take out a loan of 370k.

We have simply approached the matter from the direction of gathering our current expenses and then seeing what remains for repayment. We currently live in a condominium, which is basically provided to us for use.

Car 1: 800€
Car 2: 500€
Child: 500€ (planned for in 2-3 years)
Groceries and drugstore: 400€
Vacation: 500€
Going out: 300€
Clothing and miscellaneous: 300€
Mobile phone: 60€
Internet: 30€
Spotify: 15€
Liability insurance: 20€
House maintenance later: 500€

So about 1500€ remain for repayment. At an interest rate of 2%, we would thus be debt-free in about 25 years.

What do you think – have we forgotten anything or are we completely wrong somewhere? Please no tips now like 800€ for a car is way too little or too much – I think we have calculated that relatively well based on past experience.

Many thanks in advance for your answers :-)

Where is the savings rate? Or is it omitted?

So at the moment we save about 2500-3000€ every month. Later, during or after the house construction, I would put everything that is left into special repayments or similar. We also still have the 70k [on the high edge] saved up.

I see no problem with your calculation. Are the 600k planned including the annual construction cost increase of 5 percent? Otherwise, 2022 might possibly mean an unplanned 60k more. But you should still be able to handle that easily.

Nice financial situation, I also see few problems there, unlike the others. :)

Personally, I am not a fan of including a child as a calculation item. Like "Child: 500€". A child does not cost a flat 500€ per month. It is a family member, you wouldn’t make a line in Excel for Gerd or Elke either. :D
Instead, we have adjusted our budgets for clothing and food+drugstore accordingly generously. What we list as an extra item is the childcare place. If you want something like that, better check what it costs in your community. You can often calculate it online from tables. High income often means high childcare costs. On top of the flat rates, meal fees usually come. We do not earn as much as you and live in the countryside and pay about 400€ / month for the daycare spot.

Otherwise, I miss insurances on your list? I only see liability and the two cars (I assume those are included there). With building the house, we now have a few more. We took out term life insurances, a building insurance, household contents insurance (we had that before) and legal expenses insurance (we also had that before). Of course, none of this is a must, but it should be considered.

Other possible budgets (probably under Miscellaneous for you?) – gifts for friends/family, Netflix, Amazon Prime, ADAC, clubs, associations, broadcasting fee.

Is your electricity/gas/water/sewage included in "House maintenance"? That might be a bit tight with 500€.
For ownership, there’s also property tax, waste, sewage.
Also highly recommended (depending, we don’t have 75k saved up, so we do this): setting aside a good monthly amount for house reserves. Your heating won’t stay new forever, you have to cover every smaller or bigger repair on the house yourself. So it makes sense to put something aside monthly for that. But you already have a good buffer there anyway.

Otherwise, maybe also consider retirement planning. Insurances or savings amounts to build up a private pension, fund savings, there are all kinds of things you can do.

The increasing construction costs are already included in the 600k€, but only by about 3%.
Childcare places are a good point, we hadn't even thought of that.
Retirement provision is directly deducted from my gross salary - so it's basically already factored in.
I have also considered life insurance - especially in case something happens to me as the main earner. In the end, however, we decided that we want to take the risk.