Financing New Construction - What Can We Afford?

Hello!

I never thought I would ask such questions – or deal with the topic of building a house. But now I am, and I am more than a little overwhelmed by the topic of financing.

What concerns me in particular are the following questions:
1. What is a realistic monthly installment for us?
2. Am I overlooking something?
3. How long to finance?
4. How much can we actually afford?

I fluctuate between enthusiastic "everything should fit" and anxious "far too risky." Therefore, I would be very interested in your opinion!

Framework data:
- two adults (45, 42), no children (none planned either)
- permanently employed, both full-time
- net basic salary 4100 & 2700 => 6800
- 12.5 to 13.5 monthly salaries (0.5 fixed as Christmas bonus, plus variable additional bonus – however, we would calculate conservatively with 12.9 monthly salaries. 0.4 was the lowest variable bonus in the last 10 years).
- tax refund of at least €4,000 per year.
=> with bonuses and tax refunds approx. €7,600 net per month in total
- cold rent €660*
- additional costs €500
- mobility (including maintenance, depreciation, tax, insurance): €800
- retirement provision €900 (mostly tax deductible)
- telecommunications €120*
- GEZ €38*
- insurances: €270
- electricity €100
- living expenses: approx. €500
- other expenses**: approx. €1,000

Rural area in North Rhine-Westphalia, currently in the largest city in the area.

* = currently two apartments are inhabited, so several costs are doubled or higher than they would be in a shared household. In short, if we moved into a sufficiently large apartment together, the cold rent in the region would be more in the range of €1,500. One of the reasons why we are now thinking about a house.

** = Average 2023. Quite shocking what all came together there. Vacation, account management, gym, further education, professional associations, culture, eating out, and also health costs like glasses (those were really expensive...). Some of this was or is tax deductible. There is certainly some saving potential here. Or some items hopefully will not repeat so quickly.

That results overall in a savings rate/balance of:
- without bonuses & tax refund: €1,862
- with bonuses & tax refund: €2,662

(Overall, we were practically always above this; I have calculated very conservatively here among other things with the depreciation of the car and the very expensive year 2023. I simply do not want us to overextend ourselves!)

Additional cold rent, halving GEZ and telecommunications (without/with bonuses & tax refunds): €2,590 / €3,390

Equity: €320,000
Additional reserve: €35,000 (should not be used but be available for emergencies of all kinds.)

Verbal confirmation of the plot already exists.
Gap in building, 630 m². No slope. Already developed. No contaminated sites or easements.
Costs: €52,000 (including additional costs it should be about €60,000).
Significantly closer to the workplace but very rural. (Fine for us, hence the low price per square meter. Here in the city, the worst slope or swamp areas cost more than twice as much. Comparable building areas quickly cost five times as much.)

Now our dream house:
About 140-150 m², single-family house or bungalow. No basement.
We want to get offers from various prefab and solid house providers.
We were given approximate turnkey prices of about €350,000 to €450,000 for rather non-binding inquiries (show house visits). To what extent this is realistic, I cannot assess. I fear that the prices are stated too low. Especially everything under €400,000 seems very little to me.
(My better half has a preference for a clinker-brick single-family prefab house, which the distributor stated turnkey for €430,000 for 160 m².)

If I calculate upwards now (additional construction costs, optimistic prices, and what else might still come?), and assume €500,000, we would have to manage a total of €560,000. Minus equity, that is €240,000.

Question 5: Is the assumption of €500,000 for a turnkey house of 150 m² realistic? Or set too low?

Question 6: Whatever is realistic, we basically want to pay off the house as quickly as possible. Should we aim for 10 years (would feel better for us)? 15 years?

Question 7, another thought: With an estimated 12 months construction time, about €30,000 in wages would also come in again. Could any typical works that are not included in "turnkey" thus be managed?

This then leads to the question of all questions 8:
What kind of installments could we roughly expect?

And thus back to question 4, are these manageable for us under the above framework conditions?

Of course, no one has a crystal ball.

We would be extremely grateful for experiences – because we really have no clue. And in conversations, I am afraid that primarily something is to be sold to us – whether it is appropriate and sensible or not.

PS: These are numbers that really make me dizzy.
And at the same time, I regularly hear from my better half "you invest almost €2,000 alone from your salary almost every month anyway? And my salary is still there too!"

PPS: We also looked for existing properties in the area over the last 2 years. Either there was a huge backlog of renovation or prices over €500,000. Unfortunately, not exactly the most relaxed real estate market here.

Best regards
Papierturm

PS: These are numbers, they really make me dizzy.

Equity: €320,000

Almost everyone here on the forum gets dizzy just reading your equity.
Sorry, but where do you live? Most have barely saved 1/10 and want to build with the same salary including 2 kids… and they do it!

But I don’t want to downplay your fears and questions, however, someone over 40 should have some sense of reality.

=> with bonuses and tax refunds approx. €7,600 net per month in total

=> 6,800

No, please calculate with €6,800! That’s how a bank will do it.

Land commitment already given verbally.
Building gap, 630m². Not on a slope. Already developed. No contaminated sites or charges.
Cost: €52,000 (with ancillary costs it should be about €60,000).

Bargain. Buy it from equity, whether you want to build or not.

If I now calculate upwards (building ancillary costs, optimistic prices, and whatever else might come?), and assume €500,000, we would have to manage a total of €560,000.

€3,000/sqm living area, approx. €30,000-50,000 building ancillary costs, plus garage plus outdoor facilities. => €550,000-600,000…
Two people can also manage well with 130 sqm. If you get by with a 100 sqm ground floor plus a flatter gable roof (converted) for storage space and a hobby room, it will be even cheaper, even though the living area is not smaller.

Question 7, another thought: With an estimated 12 months construction time, about €30,000 in wages would come in again. Could this cover any work that is typically not included in "turnkey"?

You use that to pay for what was not budgeted, or for example the outdoor facilities. It is very rare that the money remains in a big pile. The kitchen, for example, also has to be paid for. Possibly lamps and furniture.

What kind of installments could we roughly expect?

Use Google and a common construction financing calculator.

In short, we would move together into a sufficiently large apartment,

You have never lived together before? Then I would postpone the house building topic and try living together first. The land can still be purchased.

There is nothing to add to the statements of .

Thank you for the answer!

Almost everyone here in the forum gets dizzy when reading about your equity. Sorry, but where do you live? Most have barely saved 1/10 and want to build with the same salary including 2 children… and they do it!

I admit immediately that I am very cautious financially. And only came into these spheres relatively late. In 2016, there would still have been 0 equity and half the net income.

Unfortunately, I have had to witness a lot of nonsense among acquaintances. Many had saved so tightly that they overstretched themselves with the house construction and in the end could not keep the house.

When I plug the numbers I suspect (because my knowledge is very limited) somewhere in, I quickly end up with numbers somewhere between €1900-€2700 per month. I know nothing about incidental house costs and similar things.

Sure, I wrote – sometimes I am totally euphoric and think "with these signs, it can only work!"
And then I remember the crap I have witnessed.

No, please calculate with €6800! That is how a bank would do it as well.

Good to know, thanks!

Bargain. Buy from the equity, whether you want to build or not.

We plan to.

(Bargain is always relative. On one side there is a field, on the other a different row of houses and behind it a forest. In the villages here, these are quite normal prices. Only toward the cities do the square meter prices rise steeply.)

€3000/sqm living space, about €30-50,000 incidental construction costs, plus garage plus landscaping. => €550,000-600,000…

Very good to know, thanks!

For two people, you can also manage well with 130 sqm. If you manage with a 100 sqm ground floor plus a flatter pitched roof (converted) for storage space and a hobby room, it becomes even cheaper, although the living space is not smaller.

We’re working on that. We both need an office each for professional reasons. That drives up the necessary space.
What we only recently considered was the trade-off between a basement vs. an extra room, where the extra room seemed cheaper to us.

Thanks for the tip about the pitched roof!

(Whether feasible or not, I have to clarify. The development plan prescribes, among other things, the roof shape; but the employee from the building authority said "the plan is so old, we now also approve exceptions.")

You have never lived together? Then I would postpone the house construction and try living together first. But the plot can still be acquired.

We have been living together 5 days/week for years. The other two are due to work. We are not worried about that. (Before I came to the current employer, I also did not have my own apartment including office. But I only earned half the salary. The small extra apartment was the solution we thought best at that time.)

I admit immediately that I am very financially cautious. And only came into these realms relatively late. In 2016, there would still have been 0 equity and net income half as much.

But exactly then you should know that it is a lot of money. Because you can also live with 0€ savings and half as much salary, as you have noticed. Now you earn the surplus that you currently have.

A bargain is always relative. On one side there is a field, on the other a different row of houses and behind that a forest.

What do you expect? Neuschwanstein opposite? A lake instead of forest? (My girlfriend is also very theatrical. Like on a pity trip. Sometimes that is unbearable)

Forest. In the villages here these are quite normal prices.

At least you seem to have a choice. Others have to stay close to the city for work and thus pay 6-10 times as much for a plot half as big. …

We are working on it. We both need an office each for professional reasons. That drives the required space upwards.

20 sqm! They can fit under the roof of the 100 sqm ground floor. That doesn’t drive anything up.

The development plan specifies, among other things, the roof shape;

A gable roof is not exotic! I’ll suggest that you take a cold shower and then come back without this gloomy whining. If you keep it, you shouldn’t build anyway :cool:

Of course you can afford it. The question is whether you want to afford it.