Financing for a single-family home in Saxony

Hello everyone,

after there were probably too many questions at once in another section of the forum, I would like to put my request here once again from the perspective of affordability.

We (my wife and I, 26 and 28 years old) would like to build (have built) a house next year. We are both employed (she part-time, I full-time, combined income around 5500 euros net). The plan is a single-family house in the Swedish style (no wooden facade due to the development plan) on an approx. 650 sqm plot of land which is fully developed and including road construction costs will cost around 95,000 euros and will be financed from equity.

The house is to be built as a 1.5-story closed prefabricated house to KfW 70 standard without a basement and possibly standing on a climate slab. Since we definitely plan to have one child and do not want to rule out another for the future, the house should have a total area of approx. 160-170 sqm. The equipment should be of high quality (so between medium and high). As a heating system, I am currently thinking of an air-water heat pump.

For the entire project, I have currently estimated the following amounts:

Plot of land including taxes and notary: 100,000 euros
House construction: 240-250,000 euros
Additional construction costs: 30,000 euros
Painting and flooring work: 20,000 euros
Outdoor facilities + finished garage: 20,000 euros
Extras: 10,000 euros

Since we currently already live in a smaller rented house and only bought a new kitchen two years ago which will move with us, the furnishing with furniture is basically complete and will not be a major item.

Available is 180,000 euros from equity, which means a loan of approx. 250,000 euros would have to be taken out. According to my plans, this would mean monthly costs of about 950 euros with an effective interest rate of about 1.6 percent (including KfW loan at 1%) fixed for 15 years with a repayment rate of 3 percent. The repayment is deliberately not chosen higher in order to keep the fixed burden low. Instead, I plan annual special repayments of 7,500 - 10,000 euros which would result in the loan being completely paid off by the end of the fixed interest period.

In your opinion, does this approach make sense or would it be better to go with a higher monthly rate (rather reluctantly)? Are the mentioned costs realistic for the region of Saxony (20 km east of Dresden) or do completely different values have to be expected?

As you have already received the answer "over there" - most people would prefer a higher monthly payment rather than a special repayment given the income...

That most people would do it that way may be true, but just because many do it that way does not necessarily mean it is better or more correct. The question is whether one or the other variant results in advantages/disadvantages. For example, does the interest rate improve if I agree to a higher initial repayment?

Hello, I can't say much about the house construction costs. But I don't think the installment is that bad. If you are planning to have children, I would calculate it so that you can still live on one salary and pay off the installment. I created an Excel spreadsheet for myself and calculated per month/year how much installment would be possible and also calculated "fictitiously" with parental allowance. (However, I left out child benefit, as it should belong to the children.) Normally, a larger installment might mean a shorter term and also higher interest rates. Therefore, I would try to find a middle ground between repayment rate, securities, and special repayments. There are online calculators where you can enter your amounts, interest rates, and repayments and also try out what, for example, 0.5% lower interest rates would make. I can recommend the one from Handelsblatt online as a repayment calculator. (just search for it)

Land including taxes and notary: 100,000 euros
House construction: 240-250,000 euros
Additional construction costs: 30,000 euros
Painting and flooring work: 20,000 euros
Outdoor facilities + prefabricated garage: 20,000 euros
Extras: 10,000 euros

The house construction costs could be sufficient for a KFW-70 house based on my layman's experience. However, I cannot judge whether that includes a climate floor slab or an "upscale" finish (What do you understand by that?). I still consider outdoor facilities + prefabricated garage at 20,000 € relatively tight, but it certainly depends on what exactly you want to do or if this is just the "minimal variant" of garden design for now. The rest could well work out. However, plan to include a sufficient buffer additionally for unforeseen expenses (or forgotten items).

We (my wife and I, 26 and 28 years old) would like to build (have built) a house next year. We are both employed (she part-time, I full-time, combined income around 5,500 euros net).

We have 180,000 euros available in equity, which means a loan of about 250,000 euros would have to be taken out. According to my plan, this would mean monthly costs of around 950 euros with an effective interest rate of about 1.6 percent (including KfW loan at 1%) fixed for 15 years and with a repayment of 3 percent. The repayment is deliberately not chosen higher to keep the fixed burden low. Instead, I plan annual special repayments of 7,500 - 10,000 euros, which would result in the loan being fully repaid at the end of the fixed interest period.

The income is great, and so is the equity. Of course, the question in your case is how the income is composed and what will happen with your wife’s income when child number 2 (and possibly 3) arrive. Maybe the rate can still be increased a little bit, but basically I see it similarly to WildThing. Special repayments always require a certain amount of discipline (not to blow the money elsewhere), but even if you don’t make a special repayment for a year, that should not be a problem for you. Therefore, personally, I would always prefer the path of a slightly lower rate to have enough monthly buffer. But that is a personal feeling and everyone sees it a bit differently.

For example, will the interest rate be better if I agree on a higher initial repayment?

I don’t know if there might be individual banks that handle it that way. Normally, that should not be the case unless you make your loan a full repayment loan.

Hello Timberwood,

We have a similar rate as you, but by far not as much monthly income.
We have also deliberately kept the rate low and want to do a lot through special repayments.
In the first year, we have almost fully utilized the special repayment possibilities with €7,500.
In 2015, I actually hope to fully utilize the special repayment possibilities.

Since you have a significantly higher income than we do, I can imagine that you easily utilize the special repayment every year.
The question is whether you get annoyed if you could only make a special repayment of €10,000 each year, although you might have €12,000-15,000 left over.
Then a slightly higher rate certainly would have been helpful.
But maybe the credit interest rates will also rise above 1.6% and you prefer to invest your money rather than making special repayments.
In that case, you would have done everything right.

Overall, it depends somewhat on how your salary development (with child/children) will be and how your expenses stand.
Try calculating backwards: what would be the maximum rate you would trust yourself without special repayments. From this annual rate, simply subtract the maximum special repayment.

Regards from Wilsdruff

Musketier