House planning completed - Is financing realistic?

Hello everyone,

we are planning to build a single-family house with construction starting in spring this year. The plan for the house is more or less finalized, offers have been obtained, now it’s about the financing. We have the following key data:

Plot of land 893 sqm already bought from private party, value €30,000 (notary costs, property transfer tax etc. completed)

Single-family house, approx. 170 sqm living area, double garage, small (hobby) workshop adjoining the house

Since my partner is a carpenter and works for a company that builds wooden houses, of course, we will get one as well. The entire house, except for a few helping hands, e.g., during assembly, will be built by him himself, so no major labor costs will be incurred here. We will also be on-site ourselves for all other work and have promised helping hands everywhere. All materials are included in the house offer.

Total costs according to offers (partly with labor costs, but we count that as our reserve) €385,000

Available equity €75,000

Financing amount €310,000

The financing amount now includes about €30,000 "buffer". We have planned a KFW 55 house, so €50,000 come from KfW financing. Two home savings contracts are currently running but will only mature in 2-3 years.

Monthly net income €3,300/month (plus holiday/Christmas bonuses, gratifications)

Planned repayment (next 4 years) as high as possible, after that family planning is to be pursued. In numbers: for the next 4 years: loan installment €1,200/month, €300 home saver/savings for reserves. After that, reduce the loan installment to about €900 - 1,000 repayment and 2 children...
Monthly living costs (incl. insurance, groceries, waste, property tax, etc.) approx. €600, 2x cars/gasoline + others (hobbies, cinema, clothing, gifts) for both €1,000.

Untouched reserves in the form of precious metals are still available for emergencies.

What do you think of the plan? Will it be manageable as planned? Or are we aiming too high? We would like to repay as quickly as possible; vacation and other luxuries have been mutually canceled. Which type of loan would you recommend in our situation?

I am grateful for any constructive opinions!

Best regards kerhan

What do you think of the plan?

I don’t see anything yet that can be called a "plan." To me, it reads like ideas and contingencies.

Will it be manageable like this?

Having a financing need of €310,000 is, in my opinion, too much with an income of €3,100 – whether with or without KfW (even a KfW wants its money back). Even with the current interest rates. At least if you want to eventually get done with it. But that’s just my opinion. With €1,200/month paid to the bank, you barely pay off anything and then want to reduce even further after about 4 years. I simply calculated with €260,000 bank loan (3.15% interest) and €50,000 KfW and come to about 36 years of payments at roughly €1,200 installments. If that is then reduced after 4 years, there isn’t much left to reduce anyway because the repayment must be at least 1%, you end up just over €1,000 monthly. That means your room of €900–€1,000 is already by far exceeded here.

For comparison (we are also still in the planning phase), with one child, two cars, insurance, additional costs, etc., we have fixed costs well over €2,300 per month with a loan repayment of €1,500 to the bank. And we have not yet filled the tank, eaten anything, or been to the zoo – let alone built up €300 reserves.

To each their own and their lifestyle, but honestly calculate all costs. You’ll be surprised. I am sure you have forgotten quite a bit.

Regarding the installments to the bank, a house also carries costs for insurance, tax, and all general additional costs like waste, electricity, water, sewage, oil/gas/whatever. That’s at least another €300 to €350 per month.

Then even you are already at €1,550 + €300 reserves = €1,850 monthly JUST for the house for 36 years(!!!). Then with your calculation, you still have €250 living expenses? For 2 people, I consider that very frugal already; if a child comes along, it quickly becomes substantially more. Parental leave also comes with a correspondingly high loss of income.

For this loan amount, I would (my personal opinion) not want to have an income below €4,000.

Likewise, I would reconsider the 170 sqm living space. We initially had about that much too. Then we looked at several houses and rooms in our size range and found it to be too much and were able to reduce costs accordingly. They also want to be expanded. But as I said, to each their own. For me, only budget, financing/term, and size don’t fit together.

Good luck.

Hello emer,
thank you very much for your opinion, even if it is negative, I did ask for constructive criticism after all.

You have somewhat misunderstood our project and the "calculation" behind it. I’ll try to explain it more clearly.

On the one hand, we have an income of €3,300 per month available, you wrote €3,100.

In addition to the mentioned monthly loan installment of €1,200 to the bank, €300 monthly goes into the [Bausparer], which, when it matures, redeems a part of the loan again (about €15,000 + possibly the cheaper loan from it).

Regarding our living expenses: everything is taken into account there. We are fed, warm, and can use water and electricity ;o)
The mentioned monthly living costs of €600 refer to the house, and include the following:
€50 electricity (heating: geothermal brine/water and wood stove with water heating for hot water production)
€50 water
€40 phone/internet
€50 insurance
€300 groceries
€17 property tax/calculated per month
€5 garbage/calculated per month
€17.50 broadcasting fee
€70 reserve for whatever we may have forgotten...

The €1,000 monthly for the two of us refers to our quasi-private expenses, i.e.
€400 for 2 cars, gasoline and so on
€600 for hobbies, hairdresser, clothing, eating out or similar, and also included here are reserves for annual contributions to our liability/accident/life/disability insurance.

So there is still a monthly margin of €200 left.

Additionally, we sometimes have extra money available for special repayments through various side incomes (temporary/part-time jobs), which I do not assume in the financing though.

I hope it has become clearer now and I continue to be happy about opinions of all kinds!

PS: If I have actually forgotten any financial items now, I also ask you to let me know!

Best regards
kerhan

All this calculating is fancy, but also somewhat risky. You’re calculating electricity and water now, but you don’t know how high that will be in 5 years. Will the salary adjust? 5€ for trash sounds extremely low. 300 € for groceries is also calculated on the low end. What about household items, cleaning products, hygiene, medication, and so on.

The 600 € luxury block is also not assessable. Insurance is okay, but how high is the share here? Hobbies... well, a house is also a hobby :D

200 € wiggle room is almost nothing, that would be too risky for me. Especially one point is missing from your list. You mentioned it. Children.
Are the 3300€ the income of your husband? Or together? Count on your income shrinking to 300 € with the second child. Also, expect high costs for clothes and childcare if you want/need to go back to work. Also, you will probably only be able to work a maximum of 50%.

Here’s an example:
My wife had a net income of 2500 before our child. Now it’s 1600 € during parental leave for the next 12 months. Tax-free under the progression clause. That means tax back payment because we are jointly assessed (for tax purposes). After that, she will return to work at 50%... net about 1000€ due to tax class 5. My net income has naturally improved a bit. Childcare for the kid costs about 300 € per month if we get a place. If not, complete loss of earnings, or expensive daycare.
If the second child follows quickly, parental allowance might be about 450 €. You have to decide whether to pull the first child out of daycare or keep them in the familiar environment. Also, you need new clothes every 4 weeks at first, tons of diapers, and new sleeping bags. The 180 € child benefit is not enough. And if you can’t breastfeed, formula also costs a lot, and if I see what our little one eats... oh dear. And there you go into your financial mess.
Because your costs continue, the bank still wants to see money. No matter what happens with you.

Enough doom and gloom. I still think you can build well, the equity is right, you just might want to reconsider the size.
We had a prefabricated house built with just under 160sqm and pay what you want to pay including the expensive plot. And that without any personal labor. However, without garage and without basement.

So I do not consider the whole discussion necessarily constructive in this way. Who still signs a mortgage contract today for 10 years with 3.15% interest? The current interest rates are significantly lower. For 10 years, something between 2.20 - 2.30% can be achieved with good negotiation. With good creditworthiness and financing of under 65%, even around 2.1%. Even for 15 years, you don't reach 3.15% - KFW loans can be deferred for repayment-free in the first years - so more room for special repayments for the main loan. In addition, the KFW interest rate is only 1.4%. When you do the math, the result looks significantly different.

Just don't let yourself be "Bockshorn"........................

400€ for 2 cars... no way. According to statistics from the ADAC, a mid-range car costs about 400€/month. A small car 300+ x. You can certainly save something by not driving new cars. But then the repair costs for an older car are higher. I haven’t seen any vacation anywhere. Do you want to spend 30 years without vacation and live only for the house?