Financing without equity with security?

The low equity mainly comes from the fact that I had a car accident 4 years ago, which I had to take responsibility for (bad luck with the trailer loan and its insurance) and have been paying for it until recently... So, liabilities, so to speak.
We have been recording our finances in an Excel spreadsheet for 5-6 years. Therefore, I would say, yes - we have our finances pretty well in view. Currently, after all fixed expenses (including incidental costs, insurances, cars, food, refueling, etc.) and with €530 rent, I have a monthly net surplus of about €1100 in my account, which I want to partly transfer to my building savings contract or to the daily allowance starting 01/2016. If I also count the rent, it would be about €1500 that I could invest in house, savings, and leisure.

I am somewhat surprised that it is said to be a low income. It's just a normal engineer's salary 10% above the average rate in the Osnabrück/Emsland region. With what income would you at least want to calculate in order to be able to take on a €1000 loan and the additional financial burdens of a house?

The reason for the low equity doesn't matter. You can't change that now anyway.

A company income is already above average.. no question. But the ratio between income and financed amount (which is also significantly above average) is quite critical. €180,000..230,000 would probably fit better. Regardless of equity: with €36,000 net per year, it is about 10 times the annual net income. We saved for 10 years and are at about 5 times the annual net income. If we had no equity.. it would also be 8 times for us. Most builders will probably be somewhere around 6-7.

Solution: Save Save Save..

Regards, Steffen

Since the family planning is complete, I see no real reason to completely ignore the 2nd household income. If necessary, one would have to check how secure the 2nd income is and whether it could even be increased in a few years if needed. With 48K€ household income on 310-350K€ investment, the ratio looks much better.

I recommend saving equity over the next three to five years. If you can actually put aside the targeted €1,100, your position looks much better. Building a house just because interest rates are currently low is, in my opinion, the wrong approach.

Strangely enough, I have already been presented with exactly the opposite as sensible (not only by people who like to sell financing), because the interest rates are supposedly too low for that. Admittedly, there was no talk of >100% financing back then either.

The reason for the little equity doesn’t matter. You can’t change that now anyway.

It was asked about in a reply and I have no problem reporting it – it just happened and can no longer be changed. Whether it would have been significantly more otherwise, I can’t say exactly, as the desire for a house was not that concrete at the time (much lower income on both accounts and a newly born child )

Since family planning is complete, I see no real reason to completely ignore the second household income. If necessary, one would have to check how secure the second income is and whether it could even be increased in a few years if needed. With €48K household income and €310-350K investment, the ratio looks much better.

Yes, okay – we don’t completely disregard the second salary either – it currently serves somewhat for “peace of mind” when it comes to such large sums – also with regard to later extensions/repairs. (Conservatory/heating conversion to geothermal or similar.)

It is certainly secure since it is a permanent position with the option of internal retraining at a company that has existed for over 100 years. Salary increases are normally routine every year in small amounts. (at least for the past 20-25 years)

Regarding my income, it should perhaps also be mentioned that holiday and Christmas bonuses as well as profit sharing are consciously not included in my calculation, as I always have the feeling that these payments are not "secure." However, this should correspond to about 1.5–2 months’ salary.

After thinking about it again, the second salary and my "special payments" could be used for special repayments.

Yes, okay - we don’t completely disregard the second salary either - it currently serves somewhat as a "peace of mind" when it comes to such large sums - also with regard to future extensions/repairs. (conservatory/heating conversion to geothermal or similar)

It is certainly secure so far, as it is a permanent position with the option of internal retraining, at a company that has existed for over 100 years. Salary increases are normally on the agenda every year in small amounts. (at least in the last 20-25 years)

Regarding my earnings, one should perhaps also mention that holiday and Christmas bonuses, as well as profit sharing, are consciously not included in my calculation, since I always have the feeling that these payments are not "secure." This would probably correspond to about another 1.5 - 2 monthly salaries.

Having thought it over again, the second salary and my "special payments" could be brought into the special repayments.

That is "cooking the books" Better leave it... the only change to the current situation would be an unexpected cash windfall to significantly increase the equity. If that doesn’t happen... you can pull on the tablecloth all you want... it doesn’t fit the table.

Ignoring special payments is very reasonable and very sensible. Don’t throw that out just to make it fit.

Regards, Steffen

1. I would completely leave out the parents.
2. A purchase, even in the land register, is 50:50 for both of you. That is also why you leave out the parents.
3. When family planning is completed, then you can and should also include both salaries, provided they are stable. Annual buffers would be Christmas bonuses and special payments. Otherwise, you are calculating yourself undervalued. Don’t get me wrong, not sugarcoating, therefore ->
4. Keep a household book. Every purchase and every ice cream, all debits: this way you get an overview of what is really possible.
5. Take a few more years. Equity is important. Saving does not mean the return, but the money you set aside to later get the loan on attractive terms.

Steffen80 is certainly right, but you don’t have to compete with him or take his version of decades of saving as the measure of all things.
That is just as unrealistic as to exhaust yourself for 30 years paying off the loan, only to realize that you have lived only for the house and thus have not really lived. It always depends individually on fate, income, demands, and character.

Tendentially, I naturally agree with you - I certainly will not put the issue directly on hold, but I will view the whole matter a bit more critically. Personally, I have currently come to the conclusion for myself that I definitely do not want to include the parental home in the long term. But if it could help in the medium term (let's say up to 8 years), I would consider it.

It is certain for us that we want/have to change location. The consideration of paying a permanent cold rent of €1000 - €1200 (here typical for e.g. a modernized semi-detached house with garden) or investing approximately the same amount in our own home makes me tend more towards owning a home again. The money I spend on rent feels like it’s thrown away because I could (at least apparently) invest it better in my own property.

These are of course all still very small incremental steps at the moment, but by mid-2016, I want to have certainty about it: I have the feeling that waiting several more years at 36 might not really make financing easier, since the repayment period will be shorter and the monthly burden higher - am I wrong in thinking that?