Financing Single-Family House 190 sqm - Loan Choice / Feasibility

Hello everyone,

we have been playing "offer ping-pong" between the banks for a few days/weeks now and we have received the final offers from our regional bank marked in red. We would be pleased if you could provide your input on the feasibility and design of this loan.

General information about you:

[*]M (28), F (28)
[*]no children; planning 1-2
[*]both employed, as commercial clerk (Dipl.-Wirts.-Ing.) and project employee in the public sector (M. Sc.)
[*]currently both full-time

Income and asset situation:

[*]net household income €6,000 = €3,400 (M) + €2,200 (F) + €400 (future rental income from currently owner-occupied and fully paid condominium)
[*]equity for house construction approx. €60,000

Expense situation:

I have prepared my own detailed breakdown of expenses amounting to approximately €2,700 per month. However, this already includes buffers (e.g. vacation fund €4,000 p.p.a.) and ETF savings rate (€200 p.p.). For the sake of clarity, I am refraining from detailing the individual cost drivers (insurance, housing, mobility,...).

Income and expense totals:

[*]Income: €6,000 (subject to wage increases and tariff adjustments)
[*]Expenses: €2,700
[*]Balance: €3,300
[*]homeowners’ association fees and additional rental income already taken into account
[*]in my target scenario (from a cost perspective "worst-case scenario") with 2 children (€550/child/month); woman working 30 hours; no salary increases until then; ongoing costs for single-family home (€400); maintenance reserve (€200); etc., a balance of approx. €2,000 would result

General information about the property:

[*]plot: 1,580 sqm
[*]land value index: €120/sqm
[*]new construction
[*]double carport with attached storage room
[*]living area 190 sqm / usable area approx. 250 sqm

Construction or purchase costs:

[*]land costs: €76,000 (already paid)
[*]development costs: €17,000 (already paid)
[*]incidental acquisition costs: €4,000 (already paid for land)
[*]construction or purchase costs: €487,000
[*]additional construction costs: €15,000
[*]outdoor facilities: €15,000
[*]total costs: €614,000

other costs:

[*]kitchen: €23,000

cost breakdown:

[*]total costs: €637,000
[*]already paid: €97,000
[*]deductible equity: €60,000
[*]financing amount: €480,000

Necessary loan details:

[*]loan amount: €480,000
[*]annuity loan
[*]interest rate: 2.42% (ZB: 15 years) fixed interest period; 2.74% (ZB: 20 years)
[*]remaining debt at end of fixed interest period: €277,000 (ZB: 15 years); €200,000 (ZB: 20 years)
[*]fictive total term until full repayment: 28 years (ZB: 15 years) | 29 years (ZB: 20 years)
[*]initial repayment rate: 2.21% (ZB: 15 years) | 2% (ZB: 20 years)
[*]monthly rate: €1,850 (ZB: 15 years) | €1,896 (ZB: 20 years)
[*]special repayments possible? Yes; I calculated with €1,000 p.a. in years 1-15 and €2,000 p.a. in years 16 until end of term
[*]repayment rate change possible? No

I have calculated a kind of break-even point to decide from which interest rate the 20-year fixed interest period is more sensible. This lies at 4.75% or higher for the follow-up financing. The differing monthly rate, which results from the minimum repayment rate, I have balanced out in this comparative consideration as a special repayment.

How would you proceed? Choose 15 years fixed interest period? Choose 20 years fixed interest period? Or conclude a mix of both models (e.g. €350,000 with 15 years + €130,000 with 20 years)? What do you generally say about the loan conditions and the feasibility of the financing?

I look forward to your assessments and ideas!

Best regards
Kevke

What I notice is the house price. 487 + 15 = 503 k€ and that includes the double carport. For 190 sqm, that should be quite a low standard or you have included a lot of personal work?

Otherwise, I find the numbers decent and quite feasible.

When children are there, 40% of the income goes towards the house. You have to like that. I would rather choose the security model. So 20 years.

I am extremely confused by the house price. 487k for 250sqm of which 190sqm is living space. That only comes out to just over 2000€/sqm of living space. And the carport is already included. Even with the ancillary construction costs, we already had 50k before the price increase, not 15k. Outdoor facilities as own work 15k could work if no roofing or similar cost drivers are planned. Otherwise, all the numbers sound reasonable so far. Planning for a woman working at 80% as a worst-case scenario was interesting. It’s certainly possible, but in our environment it is more the upper than the lower limit. Regarding the loan, I would split the amount. The scenario with 4.75% is perhaps rather unlikely, but who knows. Only 15 years would be too risky for me as well. Therefore, I would mix it. Overall, you have incredibly good interest rates. Friends of ours were offered 3% for 15 years and they also have a lot of equity and good income.

I would also question the 80% of the woman very, very critically and, to be on the safe side, rather calculate with 50%. Everything that is then additionally possible/wanted is then on top. But I would not plan it like that.

Income fits but the house costs cannot be correct like this. The connections alone with building permit cost 15k, and not a bit of earth has been moved yet. The construction costs also seem very low to me. I assume the usable area includes a basement, then the prices definitely do not add up. We are building 180m2 without a basement and come to 650 TEUR including comparable land costs.