House building: Young with savings, but clueless!

Hello,

my wife (27 y) and I (29 y) want to move into our own four walls (build) as soon as possible, but we don’t know the best way to do it.

It would be nice if you could assess our financial situation and give us some tips.

My income: 2,500 euros net
My wife’s: 960 euros (currently on parental leave)

Equity: 40,000 euros
Building savings contract: 15,000 euros (allotment in 2.5 years)
Car loan: 560 euros monthly (paid off in 2.5 years)
Rent and additional costs: currently 575 euros

In addition, we save 500 euros monthly in a daily money account.

Our financing need is about 300,000 euros.

We don’t have a building savings account or anything like that.

My question would be, we want to start building at the latest in 3 years, should we just keep saving? Should we open a building savings account and secure the low loan interest rates (that’s how I understood our savings bank advisor) or should we already start building now and secure the low loan interest rates??? (Advisor said that this would also be possible now)

Many thanks in advance
Kalle

I would save like crazy for 2 more years and then maybe build. I don't see it as pessimistic as my predecessor. Another 2 years then you would have to take out, I would say, €270,000.

One more question. Why are you buying a car with financing when you have €40,000 in equity?

Just as a note:
Construction costs
Land costs
Notary/architect or building planner/permit fees from the building authority
Costs for outbuildings/garage/fence
Costs for green areas
Reserve for unconsidered expenses

Total sum?
Include remaining car loan in the construction financing and repay immediately

Set fixed/realistic budgets from the beginning, e.g. plan and stick to them during the sample selection

You need 30% equity + "muscle mortgage"
Top up your building savings contract so it can be allocated faster
After deducting all monthly expenses, you must have about €1300 left to live on before construction starts.

You can get realistic information, including possible subsidies, from your local building authority (city) or district office
Best regards

Car loan: monthly 560 euros (paid off in 2.5 years)

Ouch! From the moment you start thinking about building, you have to start setting priorities. You will need every euro.

With your planned €340,000, you won't be able to make huge leaps. Just the house without a basement, including all additional costs, will probably have eaten up almost €300,000. Then I already think about the kitchen, lawn mower, and stuff like that, which you don’t initially consider.
If you ask for house offers, pay very close attention to what is included in the price. Unfortunately, anything is possible here. Turnkey often means you still have to add €20,000-30,000.
If you need a basement, depending on the plot, that can cost another €30,000-60,000.
Then, depending on the residential area, the plot of land will of course cost a lot, and you have to calculate about 8% of the land price for notary and taxes.
Here are our numbers:

€210,000 for the house without wallpaper and flooring and without basement
at least €40,000 additional construction costs
€10,000 garage
€10,000 kitchen
€10,000 KfW measures
€10,000 materials for interior construction
€10,000 for interior furnishings
€15,000 for garden and outdoor area
€100,000 plot of land
€10,000 additional land costs

That’s almost €400,000 for a house without a lot of frills. 140 sqm net living space. Sure, it can be a bit cheaper, but the quality also has to be right. Be careful with offers that are too cheap, especially in prefab house construction. The differences here are substantial.

In addition to the house construction, the following factors come into play:
approximately €300 monthly additional costs for the house. Additionally, you have to expect that you might have to replace your heating system after 15 years, or that your municipality decides to redo the street. As a resident, you will always be asked to pay. That means you must build up reserves.

With a full financing of €300,000, you have to calculate about €1,300-1,500 per month in interest and repayment. But that is only 1% repayment. With this repayment rate, if the interest remains at the current level (which is not to be expected), you will pay off for about 45 years, and then the bank will have received about €700,000-800,000.
You should therefore try to increase to 2% or 3% in the next few years. Or manage the €15,000 special repayment per year. If you can manage that, you will reduce the loan term to a good 20 years.

We capped it at a monthly burden of €1,000. More isn’t possible on one salary without having to give up our standard of living.
Everything left over goes into special repayments, which is currently easily €1,000 per month. But my wife will go on maternity leave next year, and no one can tell us if she will come back to her job after that. Such a loan must always be manageable on one income in an emergency.

If you are young and get along well with your families, ask if there could be an early inheritance. We were surprised how much willingness there was in the family. They were all happy to finally be able to dissolve their funds and investments, which were continuously losing value.
Asking costs nothing, and at some point, as an adult, you have to discuss such things in the family. In any case, this can take the pressure off your shoulders and enable you to live worry-free in your own home.

I wish you all the best with your plan.