Home construction financing realistic? Experiences?

Hello everyone,

I am really grateful that this forum exists, where I have been happily browsing through some evenings for the past few weeks!

We had actually planned the topic of building a house in 1-2 years, but a few conditions changed at the beginning of this year and basically got the ball rolling a bit earlier for us.

Frankly, we quickly had to realize that in 2024 we are talking about prices that my younger self would never have even dreamed of. The low prices from companies like Allkauf Haus on Immoscout and similar made us suspicious, and after further research in various forums, we were quickly brought back down to earth. For example, I first had to learn what a "shell house" is and much more. Well, it is just the way it is.

Currently, we have some plots of land that we are keeping an eye on, for example one with 600sqm size for €136,000 (+additional costs, no realtor commission). And now the uncertainty begins: We would have to be more concrete with our financial planning, and I still find it difficult to reasonably estimate the house part. How do we best proceed? Before we go to the bank, we should first know roughly how much the house costs, right? But for that, we would first have to talk to a construction company...? Can we even go to construction companies with our vague ideas without a fixed plot?

When dreaming about the house, we think of 130-140sqm, solid construction, 5 rooms including a guest/workroom, and our special requests are basically "only" a guest WC with shower, photovoltaic system and KNX.

If I piece together information from various sources, by rough calculation I get at least €400,000 for the house without extras, photovoltaic up to €30,000 and the KNX installation up to €20,000, then there are additional costs - roughly 15% of the house costs, so €60,000? And you should also set aside a buffer.

With online loan calculators, I arrive at the following figures:
- Construction project €450,000
- Additional construction costs €60,000
- Plot €136,000
- Plot additional costs €6,000 (only notary and land registry, as property transfer tax is waived)
- Current equity €70,000
makes a loan amount of: €582,000
- which corresponds to a loan-to-value ratio of 99% (582K€/(450K€+136K€)), is that correct?

The result is loans with a 10-year fixed interest period and 2% repayment, with monthly installments of about €2,700, which unfortunately is also somewhat higher than 40% of the net income.

Is our plan even realistic? Attached is the questionnaire from the pinned post.

We are grateful for any advice!

Questionnaire:

General about you:
* Who are you?
* Married couple
* How old are you?
* 32 & 25
* Are there children?
* No
* Are children planned?
* Yes, in 2-3 years
* What do you do professionally?
* IT
* Retail
* Are you employed, self-employed, retired, housewife, househusband etc.?
* Employed
* How many hours do you work?
* 40 & 30

Income and asset situation:
* What income do you have (gross/net)?
* Net: €5200 + €1300
* How much equity do you have?
* €70,000 (planned to be €100,000 by the end of the year)
* How much equity do you want to invest in the house project?
* 90%, so €90,000

Expenditure situation:

Housing costs:
* current warm rent
* €1600 "warm" is a joke... we don’t even really heat in winter because otherwise we would just be "burning" more money
* Electricity
* €90
* Phone, Internet, Mobile
* €45+15+15

Mobility costs:
* Car loan (or savings rate for a new car)
* €300
* Insurance
* €70
* Fuel
* €100
* Other
* €90 car parking space at the house

Insurance costs:
* Private health insurance (also supplementary health insurance, daily sickness allowance etc.)
* €25
* Liability insurance (also pets)
* €4
* Household contents insurance
* €7
* Legal expenses insurance
* €35

Living expenses:
* Groceries
* €400
* Restaurant costs
* €50
* Personal care/drugstore
* €25
* Clothing
* €50
* TV/Video/Audio/CDs/DVD
* €20 already paid?
* Other
* €200 (subscriptions, streaming, software, servers, ...)

Savings:
* Vacation
* €250
* House
* €2000 (building equity)
* Hobbies/Gifts
* €150+150
* Other
* €250 emergency fund
* €200 household appliances new purchases/repairs

Income and expense totals:
* Total income
* €6500
* Total expenses
* €6141
* Balance
* €359
* of which total cold rent and dispensable savings (e.g. savings rate for house)

We do not yet have further details on the remaining questions.

- which corresponds to an LTV of 99% (582K€/(450K€+136K€)), is that correct?

No. House costs (construction costs + incidental costs) plus land plus exterior facilities minus a flat 10% on everything = lending value

What does the rate with a 20-year fixed interest look like? At first glance, it doesn’t seem impossible or very loose, with possibly some sacrifice it should be manageable. But I would really think carefully about how long I set the fixed interest period and how high the remaining debt is afterwards.

At a rate of 2,700 excluding additional costs and maintenance reserves, you would spend about 50 percent of your income just on the house. How do you plan to cover the rate if one of you goes on parental leave?

Thank you very much for your answers!

Okay, so something with 582T/((450T+60T+136T+10T)*0.9) and it doesn’t get much better. Unfortunately, we also belong to the people who started saving seriously too late.

It’s heading towards 2800€ per month with a 20-year fixed interest period and a remaining debt of 220K€ to 250K€. How should I evaluate that? Tendency is rather an increase in interest rates is to be expected (of course, no one has a crystal ball), but realistically I also have to reckon that the salary won’t stay the same. So I basically look for a loan with estimated numbers for “in 20 years” and then see how long the follow-up loan would last? Sorry for the beginner questions..

That’s definitely a good point..

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My further thoughts so far: It has definitely helped a lot already to write everything down here and to think over some points again. Currently, the numbers cause more stomach aches than enthusiasm. Probably the only help is to lower expectations or wait and keep saving.

Dear , would you like to add, for better understanding, what (generically, if you like) started the ball rolling and prompted you to seriously consider a construction project up to 2 years earlier? Unless it is something urgent, you are probably well advised to continue building equity since you have a high income. Another question: The rent including heating costs seems very high to me compared to the prices for the intended plot. Is the plot significantly further out compared to your apartment? What certainly can't hurt is a non-binding remote conversation with one of the major market providers for financing comparisons. It costs you nothing and does not obligate you. Of course, they want to arrange financing if necessary and will probably advise accordingly, but you can keep that in mind. The locally operating employees of these companies know the market, can somewhat assess the plot prices, and can also give you an indicative estimate of the maximum amount for your construction project. Good luck and best regards