First thoughts about one's own house

Good evening,

to get some opinions and experiences, I have now registered on this forum after some reading.

Owning a home has long been a cherished dream of mine, and the desire for it is certainly deeply rooted in me, also for family reasons. Additionally, I want it as retirement provision, since I am currently experiencing with my parents how pleasant it is to live without having to pay high rent. Whether I will really manage to make this dream a reality will probably only become clear over time. I just want to read some initial opinions.

Due to unpleasant incidents, I got divorced in my early thirties and currently live with my son (6) in a nice new apartment in a small town on the edge of the Swabian Alb. I work full-time in the higher civil service (A13) and have lifetime tenure as a civil servant. Another man or another parental leave is currently nowhere in sight and thus no risk. Financially, I am securely standing on both feet. Child support also comes regularly and reliably on a permanent basis. However, due to the divorce, there is not really much equity available.
My family is a DIY family. We really do everything ourselves. I myself can do quite a bit, trust myself to do a lot, and am brave enough to learn new things. So really a lot is supposed to be done by ourselves. There are enough vacation days for building (and now hit me ;-)). Help, experience, and contacts are also available. More detailed plans do not yet exist.

My parents have each made 100,000 euros available to me and my brother, who is currently renovating, as an interest-free loan. Since I want to build in 3 years (end of elementary school), I am currently considering whether it is worth buying a plot of land now and already paying it off interest-free. On the other hand, I could save for 3 years and then have equity + interest-free loan available. However, I fear that price increases for plots of land will eat up my savings. I can also imagine that my parents will refill the amount already paid off to 100,000 euros again in 3 years.

The second consideration concerns the location of a possible plot. Since I myself come from the countryside, I have no problem moving back to a village. And financially, that will also be my only option. I also don’t mind playing chauffeur for my child. My parents did that too, and for me that is part of it, yes, including picking up at night. Since I love winter, I could imagine moving to the Alb. That would be about 20 to 25 km to my workplace. The standard land value currently in the preferred places is 109 or 124 euros per sqm. However, my son would then have to attend secondary school in the opposite direction from my workplace. He currently goes to elementary school at my workplace. We don’t have a close connection to our current residence (for 2.5 years) and plots are completely overpriced here. Also, the club life in the area of my hobbies (music and small ski lift in town) is active there.
Similar prices exist in two suburbs of the district town where I work. That would be only 12-15 km to my workplace. However, these villages are less attractive and the club life there does not really appeal to me. Since I have a hobby near Ulm, I at least want to live on the right side of the Rems, that is, on the edge of or on the Alb, to shorten this route.

As I said, I certainly don’t want to rush anything. I am just starting to think about this at all. Opinions are very welcome!

Best regards

Hello,

if your username = your birth year, then you are now 35, i.e. it’s five to twelve! Banks finance for a maximum of 30 years, but usually not beyond retirement age. As a civil servant teacher, the bank will assume retirement at 65.

That means: from now on, with every year you wait, your loan term decreases... 2020: 29 years... 2021: 28 years, and so on. That means, with a fixed rate (which you probably already have in mind), your loan amount decreases year by year from now on. The personal loan of this amount is also suboptimal from the bank’s perspective; would there be a chance to get it as a "gift" aka early inheritance? That would probably make the difference in your project between: >>can forget it<< and >>will work<<.

Roughly speaking, (thanks to the repayment of the personal loan and because you are a single parent) no bank will trust you with more than €800 monthly. €800 to the bank, that’s €288,000 over 30 years, of which at least €50,000 are interest (estimate, because full financing including incidental building and purchase costs), leaving €238,000. With your parents’ money, you have about €338,000 available. For the plot, €100,000 is gone at the stated price per square meter (including all incidental costs), leaving €228,000 for the house. Minus 10% building incidental costs, around €200,000 remain for house + landscaping. Despite your own contribution (let’s be honest: single parent, working full-time, not many hours can be put in), this will be a tight situation.

As I said: now or never! Possibly never, because from the bank’s perspective the risk of default due to illness/death... without a partner, where at least one can continue paying, is very high.

Hello,

if your username = your birth year, then you are now 35, i.e. it is five to twelve! Banks finance for a maximum of 30 years, but usually not beyond retirement age. As a civil servant teacher, the bank will assume retirement at 65.

That means: from now on, your loan term decreases with each year you wait... 2020: 29 years... 2021: 28 years and so on. That means with a fixed rate (which you probably already have in mind), your loan amount will decrease year by year from now on. A private loan of this amount is also suboptimal from the bank’s perspective; would there be a chance to get it as a "gift" aka early inheritance? Within the scope of your project, that would probably be the deciding factor between: >>you can forget it<< and >>it will work<<.

Very roughly estimated, thanks to the repayment of the private loan and because you are a single parent, no bank will trust you with more than €800 monthly anymore. €800 to the bank amounts to €288,000 over 30 years, of which at least €50,000 are interest (estimate, because full financing including ancillary construction and purchase costs), leaving €238,000. With the money from your parents, you have around €338,000 available. For the plot of land, around €100,000 will be deducted at the given price per square meter (including all incidental costs), leaving €228,000 for the house. Minus 10% ancillary construction costs, about €200,000 remain for the house plus outdoor facilities. Despite your own contribution (let’s be honest: single parent, full-time working, not many hours will come together), this will be tight.

As I said: now or never! Possibly never, because the risk of default due to illness/death ... without a partner, where at least one can continue payments, is very high from the bank’s point of view.

Well summarized. Could not have summarized it better given the little information. What doesn’t fit at the moment are the high construction costs and the single income.

If your parents give you the €100k as a gift, the situation is different.

Just talk to your main bank about how much you would get. Especially if the 100,000 came as a gift. With us, only one person built and only one financed. And we are a few days older. Still, ask yourself how much you can pay off per month if the absolute worst case happens and you become unable to work or sick for a long time.

Thank you for your honest opinions! I want to sit down with my parents soon. A gift has never been up for discussion because my brother would have to get it too. He pays back, but he has much higher income with his wife. But maybe something is possible after all.

When my parents built, they had a small car and gave up a lot in the first years. They also contributed a lot of their own work. Above all, I am also willing to make sacrifices. Vacationing as a single parent is no relaxation anyway. I see as an advantage that I know my salary increases exactly and know when things will get better.

As a burned child, I will definitely build and finance without a partner, if possible. Then it belongs to me, no matter what happens. At this point, I am completely unromantic.

But I see that it will probably be impossible without a gift. Loans are available here for individuals who are tenured civil servants for life. I have some like that in my colleagues. There are risks, then the house has to go and I am out of luck. If I die, my son would have to live elsewhere anyway, then the house has to go anyway. An insurance helps against inherited debts.

Apart from the finances. How do you assess the discussion about the place of residence?

One more addition with which I will now make myself unpopular.

In case of illness, I continue to receive my full salary, even over several years. Incapacity for service would indeed be a problem. I have had high accident insurance since my childhood. So the risk that remains is a serious illness with early retirement. I will inquire when and how much I will receive.

And to confirm the prejudices. I have 12 weeks of vacation. There must be something possible with that.