Home financing without equity. Is the financing amount too high?

Hello everyone,

Our Plan A was actually to build a house in the next two years and to build up equity beforehand.

However, contrary to expectations, we have found an almost perfect property for us where we can very well imagine buying it. We have been able to negotiate the purchase price down to currently €300,000.

Now the question arises whether this is even feasible, as the amount unfortunately still needs to be increased by the broker fees, notary costs, reserves, furniture, etc. In the end, we would end up with a loan of about €365,000. Without equity, of course, initially counterproductive, but it was originally planned quite differently.

We both currently earn €1,900 net each, which will presumably increase significantly for both of us in the coming years. Accordingly, we currently have a combined net income of €3,800. Children are planned in the earliest 4-5 years, then correspondingly higher salaries, which could possibly cover parental leave, etc. The amount would thus remain at least at this level.

There are no debts or loans.

Monthly expenses are various insurances about €350,
fuel, mobile phone, etc. about €350,
groceries and other costs about €250.
These amounts apply to both of us and have been roughly at this level for about two years.
For the house, I would calculate €450 ancillary costs.

If I add up all the values, I end up at about €1,400. As repayment, we have imagined a maximum of €1,100 - €1,200 per month.
So there would still be about €1,200 left at the end (vacation, reserves, possibly a second car, child, etc.).

A good friend is a self-employed mortgage advisor, and another friend also works at a bank and should arrange this loan. We had a conversation several months ago, with salaries then still lower, where we would have gotten an interest rate of 1.7% for 27 years, but for a build where €100,000 would have been through KfW.
We are 26 and 25 years old respectively and imagine setting the total term to a maximum of 35 years, preferably 30 years.

Do you think the amount is overall too high for our salaries? We don't want to pay more than €1,200 per month as repayment anyway... or is it manageable?

The financing banks have their own tables when it comes to living costs. They will definitely apply a higher value there. Future salary increases are not taken into account anyway, and it would also be a mistake to factor something like that in. Without equity, I would be surprised about an interest rate of that level. It will have at least a 2 in the front.

I dare to doubt that the bank would just hand over €65,000 like that. Additional purchase costs might be financed, but the rest?

Then there is the question of how the property will be valued. We are then looking at a loan-to-value ratio of 120-130%. That will certainly be very expensive. Provided, that it will even be financed at all.

The financing banks have their own tables regarding the cost of living. They will definitely assign a higher value there. Future salary increases are not considered anyway, and it would be a mistake to include such things. Without equity, I would be surprised by an interest rate at that level. It will have at least a 2 in front.

We went through everything. That's not true, at 3 different banks it was each below 2%. The rest is clear, correct.

Furniture and reserves are not financed. If you are planning renovations, then maybe round them up generously so that you have some buffer. However, it sounds to me like you don’t have any equity at all? Did you possibly start looking a bit too early? What is the market value of the house?

Otherwise, read similar discussions in the forum that have taken place in the last few days :)