Financing new single-family home construction - full repayment, building savings contract, or annuity loan?

Hello everyone,

I have been following various topics here for a while.
We are now entering the critical phase of financing our single-family home and are unsure and disagree about which is the "best" or most sensible offer. Here are the facts:

General information about you:

[*
Who are you? Two adults, married
[*]How old are you? 34 / 39 years
[*]Are there children? No
[*]Are children planned? Yes, max 2
[*]What do you do professionally? Employed in industry and construction
[*]How many hours do you work? Full time


Income and asset situation:


[*]What income do you have (gross/net)? 2,500 (she) / 3,000 (he) (net)
[*]How much equity do you have? Land + 50,000€
[*]How much equity do you want to invest in the house project? 20,000€ + own contribution: mostly structural work done by ourselves (professional knowledge and experience available); other trades can be supported or also taken over by skilled friends



Expense situation:
Housing costs: 300€ (living in parents’ house, granny flat)

Mobility costs: 40€ (currently) -> 150€ (longer distance), 1x car, 1x travel expenses covered by employer


[*]Total income: 5,500€
[*]Total expenses: 3,000€
[*]Balance: 2,500€
[*]of which cold rent and dispensable savings: 700€



General information about the property:

How large is the plot? 850 sqm


[*]How high is the standard land value? 85€/sqm
[*]New single-family house (solid) with double garage or carport
[*]How large is the house? (living area / usable area) 223 sqm / 50 sqm
[*]What is the market value of land and house after completion? 534,000€


Construction or purchase costs:


[*]Land costs 73,000€
[*]Construction or purchase costs (incl. architect, structural engineer): 360,000 – 400,000€ (architect services provided by ourselves)
[*]Incidental building costs (e.g. house connections, soil expert, construction electricity etc.): 10,000€, construction electricity connection not necessary, provided by neighbor, payment per consumption
[*]Exterior facilities/terrace, paths, garden design, fences etc.: included in construction costs
[*]Total costs: 483,000€


Other costs:


[*]Kitchen costs: 15,000€
[*]Furniture, lamps, decoration: 20,000€ (depends on financial situation in the end; many furniture pieces can be taken along, amount can be omitted if it gets tight)


Cost summary:


[*]Total costs: 518,000€
[*]Deductible equity: 73,000€ (land) + 20,000€ + 25,000€ (own work, more is not accepted by most banks)
[*]Financing amount: 400,000€


Necessary loan details:

Offer 1 (Allianz)


[*]Loan amount 401,000€
[*]Loan type: full repayment
[*]Interest rate: 1.31%
[*]Fixed interest period: 30 years
[*]Remaining debt at end of fixed period: 0€
[*]Initial repayment rate: 2.75%
[*]Monthly installment: 1350€
[*]Special repayments possible? 5% p.a.
[*]Change of repayment rate possible? no
[*]Up to 10% of the loan amount can be repaid free of charge



Offer 2 (ING)


[*]Loan amount 401,000€
[*]Loan type: 2x annuity loans
[*]Interest rate: 1.22% for 20 years / 0.67% for 10 years
[*]Fixed interest period: 20 / 10 years
[*]Remaining debt at end of fixed period: 156,000€ / 10,000€
[*]Fictitious total term until full repayment: 66 / 17 years
[*]Initial repayment rate: 1 / 5.5%
[*]Monthly installment: 370 / 1030€
[*]Special repayments possible? 2,000€ / year
[*]Change of repayment rate possible? Yes, 2x per loan
[*]After 10 years the rate with the 20-year loan will of course increase accordingly – remaining term decreases respectively or possibly a follow-up financing after 10 years if something better comes up



Offer 3 (BHW, KfW)


[*]Loan type, amount, interest rate, fixed interest period, monthly installment:
[LIST]
[*]Annuity loan: 300,000€, 1.18%, 20 years, 920€
[*]Building savings contract 1: 134,000€, 1.25%, unlimited, 180€ (savings phase), 1231€ (repayment phase)
[*]KfW124 loan: 100,000€, 1%, 10 years, interest only
[*]Building savings contract 2: 100,000€, 1.25%, unlimited, 415€ (savings phase), 486€ (repayment phase)


[*]Remaining debt at end of fixed period


[*]Annuity loan: 130,000€
[*]Building savings contract 1: 0€
[*]KfW124 loan: 100,000€
[*]Building savings contract 2: 0€


[*]Fictitious total term until full repayment


[*]Building savings contract 1: 6 years
[*]Building savings contract 2: 11 years


[*]Initial repayment rate: annuity loan: 2.5%
[*]Special repayments possible? Annuity loan, max 5% p.a.
[*]Change of repayment rate possible? Yes, at least 1.5%
[*]The annuity loan will be redeemed after 20 years by BSV1, amount of building loan 1: 91,000€ and is repaid with 1,231€
[*]With the KfW124 loan, only interest is paid in the 10 years, which is included in the 415€ of the savings phase of BSV2 (we did not receive a concrete breakdown here), thus the 100,000€ from KfW124 transfers to BSV2 after 10 years and is then repaid.

Mathematically, offer 1 seems to be the cheapest option, but quite inflexible
Offer 2 cannot be finally calculated -> depends on the conditions in 10 years, but flexible, yet somewhat uncertain
Offer 3 is a bit more expensive than offer 1, but the rate is higher and basically flexible; here you have to be careful about follow-up financing due to the building savings contract

Basically, we calculate with a loan amount of 360,000€, but since most banks only recognize up to a max of 30,000€ for own work, we "have to" take 400,000€ – maybe we will need it later and be glad to have it.
We are satisfied with monthly installments around 1,300€, which should be manageable even during parental leave.

Which financing option would you prefer and why?

At first glance.

1. Additional construction costs €10,000? How is that possible? Registering the land charge alone, even though it is a purchase incidental cost, already costs €2,500. In addition, construction road, insurance, soil survey, surveyor, connections. Expect at least €30,000.

2. €400,000 for a 223 sqm house + 50 sqm usable area? That will only work with a lot of personal effort.

Hello,

thank you for the first feedback.

1. Additional construction costs: The mortgage is paid in cash. Construction road and soil survey are not necessary. We will do the surveying work ourselves, surveying only at the end by the local surveying office (approx. €1,500), connections (water: approx. €1,000, gas: max. €1,000, electricity: approx. €1,500, telecom: approx. €800), insurances will be clarified in the next weeks.

2. Construction cost calculation is based on the guidelines for structural facilities from the local building authority.

Hello,

thank you for the initial feedback.

1. Additional construction costs: the mortgage will be paid in cash. Construction road and soil survey are not necessary. We will do the surveying work ourselves, surveying only at the end by the local surveying office (approx. €1,500), connections (water: approx. €1,000, gas: max. €1,000, electricity: approx. €1,500, telecommunications: approx. €800), insurances will be clarified in the next few weeks

2. Construction cost calculation is based on the standard rates for buildings from the local building authority

- Energy efficiency consultant if KFW 55 is better..
- Multi-utility connection
- Construction water, construction electricity.
- External construction supervisor (you won't know everything and this may incur costs later)
- Building permit with us approx. €1,700.

If everything is correct (I am very skeptical about the house price), I would take the offer from Allianz.

- Energy efficiency consultant if KfW 55 is better..
- Multi-utility connection
- Construction water, construction electricity.
- External construction supervisor (you won't know everything and that can cost later)
- Building permit application with us approx. €1,700.

- Energy consultant omitted, as hardly any KfW funding is possible due to own contribution
- Multi-utility connection approx. €500
- Construction water not specified yet, construction electricity omitted, as we are supplied via the neighbor
- External construction supervisor omitted - my husband is a civil engineer -> own contribution
- Building permit application already paid (€580)

Thanks for the assessment :)

- Energy consultant is not needed since hardly any funding from KfW is possible due to own work - Multi-utility connection approx. 500€ - No information yet on construction water, construction electricity is not needed as we are supplied through the neighbor - External construction supervisor is not needed - my husband is a civil engineer -> own work - Building permit has already been paid (580€) Thanks for the assessment :)

And the neighbor gladly takes over the 1,000 €+ in construction electricity costs? Ok, since he is the civil engineer, then of course it will be cheaper. I thought at 3,000 € he was a construction worker and that civil engineers would earn much more. My mistake :-)