House financing via condominium ownership

Hello dear members,

I came across the forum through a very well-known search engine, and I am convinced that one or the other here can help me.
First, a few data and facts about me.

I am 23 years old, permanently employed at a large DAX company, earning a net monthly income of about €2200 (+/- 100).
I have saved a small amount of equity, currently €18,000.

Now I want to move in with my girlfriend in my hometown, and instead of paying rent monthly – also because of the current interest rate level – I would prefer to buy something of my own. This should be financed only with my salary, but my girlfriend would contribute more to the "household budget" and of course pay half of the additional costs.

Since a house is probably not an option at the moment, but I still want to work toward it, the interim solution should first be a condominium that, when paid off, will be sold and serve as start-up capital for a single-family house.

Condos with my requirements cost around €100,000 - €150,000 in this region.

What conditions should be offered to me for a loan amount of about €130,000?
Is it best to fix the term at 15 years?
Do the interest rates skyrocket if you haven’t saved at least 20%? (In my case about ~14 - 20% equity)

Of course, it should be paid off as quickly as possible, I could imagine paying about €800 per month + special repayments (bonus, Christmas bonus).

Am I thinking realistically at all? Or am I taking on too much?
I am looking for people who may have realized their dream of a house in a similar way and for opinions on my "financing plan."

A visit to the bank, or to several banks, is still outstanding. I just wanted to inform myself in advance :).

Thanks to the pros/experienced people who have read this through now and hopefully help me with an answer.

Regards

Oh, and sorry that this doesn’t quite fit here (home financing and such – but as I said, it should be part of the home financing –

If you can really afford €800 per month for the loan, it should work. Currently, you can take out a loan of €100,000 per €500 installment and still repay at approximately 2%.

In addition to the loan installments, you of course also have to consider the monthly property charges. A few hundred euros per month can quickly add up there.

However, your equity capital is rather limited. In addition to the purchase price, there are also notary fees (approx. 1.5%), property transfer tax (3.5% or 5% depending on the federal state), and possibly broker fees (up to 7.14%). Besides the purchase costs, you might also need some money for renovation (painting and flooring work) and maybe also for furniture such as a kitchen. This means your equity capital will likely be used up quickly, resulting in 100% financing.

I just entered the data into an online calculator. With 100% financing, interest rates quickly exceed 4%. With 95% financing, you are already about half a percent lower. So you should also consider alternative loan options. For example, how about your girlfriend? You could, for instance, offset the repayment with the additional cost payment. Maybe your parents/grandparents are also willing to contribute an amount. It doesn't have to be free of charge. At 3% interest, there is even a win-win situation. Under certain circumstances, a consumer loan could also make sense with these high interest rate differences.

Definitely get independent advice.

Hello,

in principle, I think the decision to buy an apartment is good. From my own experience with the same income as you have, I would recommend a rate of about 500 - 600 euros. This corresponds to about 2% repayment with 4.5% interest fixed for 15 years – as my predecessor already roughly calculated. If then additional charges and electricity are added, you end up at about 1000 euros in total. I would not advise you to take on more burden. Then you still have 1300 euros left for living expenses, car, some savings while maintaining a good quality of life. Better, if possible, to make a special repayment. Life does not only consist of paying off a construction loan – especially in young years one also wants to experience things.

The interest rate of about 4.5% for a full financing is good. I would advise you to start with 2% repayment, with the option to change the repayment so that it can be lowered if necessary. I made the mistake of only repaying 1% in the first 10 years and only went up to 2% now in the follow-up financing. However, back then the offers with repayment changes were also too expensive since I had set my limit at 600 euros credit burden. Special repayments were not possible – because I also had furnishing and special charges for windows in recent years.

This way you also have the security to manage the condominium alone – since the costs, apart from the somewhat higher additional charges (due to reserves, maintenance), are equivalent to a rent burden. Consider in your reflections that changes can still happen in your life. Separation from girlfriend, job change.

When choosing the apartment, I would also pay attention to good rental potential and a central location, since a sale can possibly be the worse deal, keyword depreciation. Then the bridge you intend to build to the house can quickly break.

One consideration would be a 3-room apartment. They can be rented better than 2-room apartments and you have space reserves for offspring – in case the house construction is delayed.

In sum, a full financing is possible with the salary and price expectations. I would not recommend more credit.

Regards

Addendum: So the apartment should not cost more than 115,000. The equity for additional purchase costs, renovation....

Regards

However, your equity is rather limited. In addition to the purchase price, there are also notary fees (approx. 1.5%), real estate transfer tax (3.5% or 5% depending on the federal state), and possibly broker fees (up to 7.14%).
Besides the purchase costs, you may also need some money for renovation (painting and flooring work) and maybe also for furniture such as a kitchen. This will quickly exhaust your equity and it will become a 100% financing.

@Musketier: Correct me if I'm wrong, but I don't see a 100% financing here!

If the apartment costs, for example, 130,000 euros + additional costs (roughly calculated at 10% - it depends) 13,000 euros = 143,000 euros for the apartment. Maybe another 10% miscellaneous = 13,000 euros, then I'm at around 156,000 euros. He has 18,000 euros equity, so a loan requirement of 138,000 euros. That makes for me an 88.5% financing. Then the conditions look quite different again. ;-)

Nevertheless: definitely get advice from an independent financial advisor!!! :-D

Best regards
Goldbeere

You include the additional costs and renovation. However, with your numbers, there are 138,000 EUR to finance and 130,000 EUR purchase price to offset. That is... calculate calculate... more than 100%.

I financed 75,000 EUR with KFW. That counts as equity if you organize it yourself and significantly lowers the bank's interest rate. This probably allows you to easily come under 4%. Whether to include KFW must be decided depending on the situation.