House purchase planned at the beginning of 2015 - No equity

Good day,
first of all, a "hello" to the forum and I hope I have landed in the right section.
About myself - I think this is quite important in the context of the question, I am 28 years "young" and have been together with my partner for almost 5 years. We both work full-time and have a steady income.

We currently live in Frankfurt and would like to realize a home of our own at the beginning of next year. Since I am always a bit skeptical, I would also like to get tips and information here, but also criticism. Besides the home, a child is planned for the end of 2015 (this is of course a financial impairment). However, it is also clear that she would like to return to part-time work about 1 year later.

Location: Niderrau/Bad Vilbel (near Frankfurt)
Property: Preferably half-timbered house, with small courtyard and garden (the latter mandatory)
Price: Option 1 - 130-180,000, Option 2 - 220-300,000
- Option 1) We buy a single-family house > 5 rooms with garden and courtyard and cheaper for that.
- Option 2) We buy a multi-family house (2 units) > there should be a >5 as well as a 3 unit here.

In option two, the aunt of my partner would move in, and so we would have a reliable and great tenant. I would see this as an added value because we would have someone for our cats and also the planned dog/kids. We can support each other this way and of course she would also have a considerable win situation. Additionally, she would also share in the ancillary costs, which would be partially offset against the rent).

Regarding financing - As in the headline, we have no equity (of course, some will be set aside - 5-10k) and I see this ambivalently. We currently live in a 2-room apartment and urgently need more space in the long run. The time for saving reserves (I would assume 6 years here) conversely means 6 years postponement of the mortgage repayment. Together we have an income of about €3500 including deductions; another current loan is a car loan. However, I will pay this off already this early summer (thereby 2 years earlier).

The important point is, we already had a 2-hour consultation with a larger local bank (a good acquaintance works there in a management position). Due to the contacts, we would certainly receive a loan for the amount, which generally does not work this way. This is an exception, but she also made it clear to us that we made a very positive impression.
As an example, a split into usable and rental unit credit was explained to us (greater interest rate security on the usable credit - 20 years), we should also open a home savings contract in parallel to secure a loan later or to finance repairs.

I am unsure whether this makes sense, I know these are initially relatively few details, but also because I am certainly overwhelmed with the situation as this is not my area of expertise.

Best regards & thanks

Hello MacGyver,

You both have a combined income of approximately EUR 3,500.00 and no equity.

What have you done with the money so far? Every reputable banker will ask you that.

If you can save EUR 5,000 - 10,000 by early 2015, then we are talking about a monthly saving performance of EUR 625 - 1,250.

Then you plan to have a child by the end of 2015, which means a noticeable reduction in income.

Roughly estimated, you currently calculate at least about EUR 500.00 burden per EUR 100,000.00 loan amount.

Sorry, please don’t be mad at me – I only see a very small chance that this will work out well.

The financing that the acquaintance in a management position at the bank is offering you, I (also a banker) could not reconcile with my conscience – to me, the risk is too great that the customer might someday face the ruins of his existence if the bank has to auction the house.

Of course, this can also work well (with major restrictions for you), but an unplanned larger expense or the (temporarily) loss of income could also financially break your neck.

I would recommend you save at least enough to cover the acquisition incidental costs (notary, property transfer tax...) and then seriously get started.

Even with the then upcoming 100% financing, a significant reduction in your standard of living awaits you...

Regards,

Dirk

Hello MacGyver,

finding something near FFM at these prices - hmm, I consider this a big challenge. We are talking about an area which, alongside Munich and Hamburg, belongs to the most expensive areas in Germany.

180,000 for a single-family house, 300,000 for a multi-family house? It depends on which building substance you are satisfied with and which backlog of renovations you are willing to accept (you will eventually want to fix that). I entered your criteria on a well-known real estate portal and the hits started at 250,000 with no upper limit. But well - I am not that familiar with this area either.

Regarding financing, I can agree with . With your desired loan amount (single-family house), it could work at the moment - however, part of the income will drop off in 2015 with the birth of the child (the distribution of income between you two is missing). Please consider - if your partner wants to go back to work, the little one needs to be cared for. That also costs a good amount of money.

Personally, I would recommend you wait until 2017. On the one hand, you can save something. On the other hand, you will then see how high the total burden (including child and all) will be - believe me, it will increase quite a bit. Then you can better assess your house wish.

Better to exercise a bit more caution before everything ends up in a shambles.

Besides - even a good acquaintance at a bank (even if he is in a leading position) has to be accountable. Supervisors, auditors, etc. still watch closely. In addition, as written in another thread, there is still a second review instance that should give the statement independently from the advisor/acquaintance. Unless he/she is on the board, ...

First of all, thank you for your feedback, the price level itself is highly speculative in Frankfurt, and of course this also affects the surrounding areas outward. In the direction of Nidderau (15-20 km away), there are various properties at those prices, and the connection there is quite convenient and is not further for us than from our end of Frankfurt to work. The income does not include my bonus, and the weighting is about 60/40, so during maternity leave there will be a cut, but it will not be quite as extreme. Also, it would be clear for us to marry before buying a house so that contractual matters can be fully settled (inheritance, etc.). Here there are also slight tax advantages. We can also clarify in advance whether she can work part-time via home office again after the year (which would be quite conceivable). With option two, the income is not correct anyway, since rental income also comes into play here and counts as income. Regarding the revision – as I said, the loan is not an issue, it’s not just any acquaintance in the bank and the whole thing runs via the manager there anyway and, of course, correctly. Our appearance was also one of the decision criteria for a loan. Otherwise, to err is human; I do not believe that the advisor here unknowingly gave false reassurance. I clearly said that I do not want to take apart this loan. So that was the positive part, I myself am very pessimistic, so I can certainly understand your criticism. By way of comparison, I alone pay 850€ plus utilities for an acceptable 4-room apartment, with that I am not far from a loan, and then I do not build up that much savings anymore and above all I do not repay a home yet... A house does have a considerable added value; the question for me is a) what one can afford to pay and b) what one should pay for a property given the income. I am quite skilled in craftsmanship and can imagine various renovation works (roof, building fabric must of course be right), but as a layperson, in my opinion, one cannot and should not judge such things. Experts understand it anyway, but assessing a construction site without knowledge screams of miscalculation and is something for a TV format...

I also don’t see a reasonable house for the price in Niderrau / Bad Vilbel.

The plots of land are already expensive there. You’d have to look in a small neighboring town, and even there, it’s tight.

We once looked around the Bad Nauheim / Butzbach area. And even there, in small towns like Ober-Mörlen or Rockenberg, it’s not cheap. Unless you’re looking for something to renovate yourself. But then you get dumps where you’ll have to invest at least the purchase price again in refurbishment. Have you already looked into the housing market in that area?

Our rental house will be sold in the middle of next year when we move out. Nicely built with 2 apartments. Hardly usable due to the layout. Needs a new roof, new facade (this also applies to the outbuilding), new heating system. Probably new flooring and ceiling. Plumbing and water as well. The basement is damp. Our landlord once asked us if we wanted to buy it. Your budget wouldn’t have been enough with renovation. And even then it’s cramped—the core of the house is over 100 years old with an extension from the 70s.

So I have found several offers in the district of Nidderau here, to what extent they are incorrect information has to be examined. We wanted to look at a few properties. I have only looked at properties that are not in need of renovation or on [Erbpacht]. Otherwise, I am quite aware that the search process for a house can take months or years. That is why we have now also started to request viewings.