Full financing, or rather not?

Good evening, good night,

we have been thinking about building a house for a few months. I could buy a plot of land that is very small and expensive, but in a great location. The costs amount to 75,000. I have also requested offers for house construction; turnkey, my desired house costs 280,000.

I am also budgeting 10,000 for a kitchen and 35,000 for incidental costs, making a total of 400,000 euros. Through personal contributions, we can reduce the costs by a few tens of thousands because we can get several trades very cheaply. On the other hand, we might still need a reserve. However, our equity is only 20,000 euros, so I would rather speak of full financing.

We are in our early 30s and have two small children. Our net income is about 5,500 euros. Special payments are not included. Currently, we pay 1,400 rent + 400 incidental costs, and I would prefer not to invest the money in the interest of my landlord's loan. We save about 400-500 euros per month on average. However, we prefer to spend the money rather than invest it for low returns (you only live once).

The question is, what interest rate can I expect at the bank? Is 2% realistic with a 20-year fixed interest period? Is my project too risky?

If I pay 100 euros monthly into a building savings contract after buying the house to cover repair costs later, e.g. in 20 years, is that enough?

Perhaps one more question on the side: What can a shell construction cost, including planning, structural engineering, formalities, construction site setup? The house should be about 14x9 meters in size, with double-shell masonry (Poroton, core insulation, clinker bricks), with a Frisian gable, approx. 150m² of living space.

Thanks for any feedback.

400,000 × 0.05 / 12 = 1,700 Euros

However, I wonder if you live on a deserted island. You have completely ignored the ancillary construction costs.

As for the interest rate, there are plenty of calculators on the internet. Set the loan-to-value ratio to 100%, if that is not possible, then to 80%, and add another 20-40 basis points on top.

And then comes the question again whether you can really get by with the 280,000 Euros. I would doubt it, regardless of the building location.

And I do not understand the following sentence at all: "By doing some of the work ourselves, we can reduce the costs by a few tens of thousands of Euros because we get the trades very cheaply."

A few tens of thousands of Euros are probably at least 30,000 Euros. I consider that absolutely unrealistic and naive. Are you doing it yourselves or do you know someone who knows someone? Cheap is not always inexpensive.

And as for the maintenance reserves, one should calculate with at least 2 Euros, preferably about 3 Euros per month.

I completely agree with toxicmolotow. Your income of 5500 EUR net is already quite good and the financing is certainly not a problem. Of this 5500 EUR you live on 5000 EUR and here I see the problem. It’s no longer doable in the house. Regardless of financing, regular costs will probably arise for you after moving in.

Also bad is the lack of equity. That wouldn’t be enough for me.. You have a good income and should easily be able to save 2000 EUR per month. Two years of that and with 50k equity, everything looks better. 20-30% equity would be the goal.

Regards, Steffen

We prefer to spend the money rather than invest it for meager returns (you only live once).

And that is no justification. Either you want one OR the other (or earn enough for both :rolleyes .

Hello!

Thanks for your feedback.

I calculated the ancillary construction costs at 35,000 [Tsd.], they were not forgotten.

My calculation looks like this: we are currently paying 1,400 euros in rent and quite high additional costs. Unfortunately, the property is energetically a wreck. I would like to push the construction costs to an amount that can be financed with an amount similar to the rent. Then we wouldn’t have to change our lifestyle much. Possibly compromises will have to be made. I know many craftsmen and we have a construction company in the family.

Of course, we could now do without a lot and save. But if interest rates rise then, I’ll be kicking myself in two years. Besides, we have quite some "pressure to act" and want to get out of the rental property. Naturally, I want to prevent moving into another rental property with all the costs involved.

If the incidental building costs are included, you have forgotten the additional costs.

Why should the interest rates rise?
What kind of pressure to suffer?
Can the companies mentioned build for free?
How else do you come up with a savings of a few ten thousand euros?
And what do you call pressure to suffer?

By the way, we paid 300,000 EUR for 125 sqm without land and without a basement. Just as a point of reference.

Please take off your rose-colored glasses.

Your rental costs are considerable. If you want to move out anyway, what speaks against taking a cheap, small rental apartment now and intensively dealing with the topic over the next two years? By the time you start, one or two years will pass anyway.