Home financing: Is a property feasible with a good income situation?

Hello,

we are a small family (1 toddler) and are currently considering the potential purchase of a property. Our savings are modest, but we have a fairly decent income situation. I would like to gather a few opinions on this:

We have a property (new from the developer) in mind for about 215,000 euros, plus additional costs (land registry + notary) and materials for self-performed work; I expect a requirement of around 250-260,000 euros.

We could easily afford a monthly loan installment of 1,200 euros without any problems/restrictions, and special repayments of 5,000 euros per year would be feasible.

Now to our problems:
We have equity of about 10,000 euros.
My partner’s employment contract is temporary.

Regarding the equity: I also have a Riester and a company pension policy lying around, with a total surrender value of about 10,000 euros. Is it possible to use these in any way (even without terminating the contracts)?

Regarding the temporary contract: I contribute most of the household income from my permanent employment contract. My partner would probably be able to find another job in this salary range quite easily, even if the current contract is not made permanent.

The next step would be a conversation with a financial advisor, but that only makes sense if nobody here advises against financing above the value of the property.

The background to our considerations is, on the one hand, the desire to stop paying 900 euros rent monthly and, on the other hand, to benefit from the low interest rates.

Are there any opinions on our plan?

Thanks and regards
Paul

the interest rates have long since stopped being favorable. and if they are, then only for people with reasonable equity. €10,000 is nothing and should rather be the reserve at the very end of the house construction. because something always comes up...

for €1,200 per month, you can get €250,000. the only question is when you will actually be finished.

the interest rates haven’t been favorable for a long time. and if they are, then only for people with reasonable equity. €10,000 is nothing and should rather be the reserve at the very end of the house construction. because something always comes up...

for €1,200 a month you can get €250,000. the question is just when you will be finished.

Your post is so helpful that you could have saved it. This doesn't help anyone ... this kind of answer is always a mystery to me ;-)

@ OP
Please tell us a bit more...
- How is your income distributed?
- What about your expenses (keyword: household budget)?
- How old are you?
- What do you want to build? Size?
- Where do you want to build? City/countryside?

€250,000 at ~5.5% annuity (~€1,200 p.m.; 3% interest over 20 years; 2.5% repayment) and you’ll be done after ~24/25 years. Due to the lack of equity (high loan-to-value ratio) there won’t be top conditions here -> best to explore the options; for example, we had quite good experiences with Interhyp.

But I would also look at this from the cost side again. I’m not an expert and details are missing here, but I find your estimated total costs (i.e. all-in plot, construction costs, incidental building costs, etc.) of €260,000 relatively low.

For example, we are at about 160 sqm living space with basement around €320-330k – all this without incidental building costs and land.

PS. I would leave special repayments aside for now and not include them in the calculation. In the end, they usually aren’t used.

As tmbau16 has already written, some more information would be needed to make better statements. It is also questionable whether a second child is planned? Are there possibly any bigger purchases coming up, e.g. a car or something similar? Reserves should also be available for that.

Since you already have one child, you could create a great income/expense calculation. Possibly with an example, the fixed-term contract of your partner would be terminated to represent and calculate the worst case.

As has already been written, I personally find the costs including the land set far too low.

Regards Andi

The income of your partner will not count because the contract is temporary. Therefore, it depends solely on your income, as the child benefit does not count either. You can calculate for yourself whether a three-person family and the mortgage installment can be managed with one income, as that is how the bank calculates. If yes, the low equity capital is definitely not a problem, it wasn't for us either (we had only saved the incidental purchase costs). But before you now create a household budget and compare all expenses to income, save yourself the effort. Banks calculate with per capita flat rates, and it does not matter here whether your expenses are lower. However, not every bank uses the same flat rate. Since you do not know this in advance, let the financial broker handle it. By the way: ongoing loans/maintenance obligations are added on top of this flat rate, but living expenses are covered by it. To obtain offers or to engage the financial broker, you should be able to submit a concrete real estate offer with all necessary documents, from which the final price including everything should be apparent.

Is it the case with all credit institutions that loans are granted in very few cases when the partner or oneself has a fixed-term employment contract or short-term self-employment?

I was not sure about that, and we recently had this case in our circle of acquaintances with 2 couples. In one case, he was only employed on a fixed-term contract, and in the other case, she had been self-employed for 3 years. Both times it was communicated that no loan could be granted due to these points (of course, for the case of building a house).