How should we finance? Budgets and their distribution?

Hello Christian,

I can well understand your considerations. How much equity you use ultimately depends on your risk capacity. What is not quite clear to me yet is, you write that your assets are your entire retirement provision, but at the same time, you indicate in your profile that you are an employee. I would understand entire retirement provision to mean that there is no statutory pension entitlement. But assuming that it is present after all, then for me the matter would be clearer and I would probably do it as Milo suggested: Use as much equity as necessary to get the lowest interest rate, but no more.

The rest, then, in my understanding, must flow almost 100% into riskier investments (i.e., stocks), of course minus a certain liquidity for everyday purchases. Because any low-risk investment currently will not beat your 1,X percent loan interest, which you get completely risk-free by repaying. So repaying would be preferable to any low-risk investment at any time. But I think you are aware of that.

Hello Christian,

our starting point was very similar - however, I am now a bit annoyed that I didn’t completely exit at 13,500 back in January... Hindsight is always 20/20. In the end, I only kept the portfolio that dated back to before 2009 (and thus has permanently tax-free capital gains...). The rest had to go after all. Rising construction costs and falling prices was a really bad combo this year... Unfortunately, banks only lend against the portfolio with huge discounts, or they are simply not used to it (a classic securities loan tends to have a rather unattractive interest rate).

Have fun building!

And don’t worry, with your mindset the money will come back quickly, even if the construction turns out to be more expensive than expected!

Hello everyone,

Once again, many thanks to the many forum members here and their opinions!

About 5 weeks after the last posting, the stock markets have indeed gone significantly down. As a result, our equity has also dropped by a good 20 thousand euros... unpleasant, but easy come, easy go.

What is currently emerging in parallel is that the purchase or construction prices are galloping massively. We probably have to invest 650 thousand for a little house. :-(

Even though our situation looked good at first glance, I am now wondering how other families with significantly less starting capital realize their dream of owning a house!?

Best regards Christian

An interesting but complex topic. It is somewhat more delicate for you because of the subject of retirement provision.

Izuu32 described this very well.

The following questions arise:
- Are there still statutory pension entitlements?

If yes, then it makes it somewhat easier.

If not, one has to ask how the entire retirement provision strategy looks and how the house fits into it. Because the house is, apart from the saved rent, dead capital that cannot be directly capitalized in retirement. Reverse mortgage, sale, and such shenanigans excluded for now.

That means where should the monthly pension come from?: rental income from the condominium, interest, dividends, bank payout plan, pension policy with a lump sum? Here one would have to consider what minimum amount is needed at the start of retirement which can then be converted into a monthly pension.

An unfavorable asset mix at the start of retirement would be, for example: 800k house + 150k rest. That would force you sooner or later to sell the house.

- How strong is the desire for a house?
If it is certain that construction will begin in 2-3 years, then I would IMMEDIATELY withdraw the amount intended as equity contribution from the stock market. Anything else would be stupid.

The equity portion of the financing depends, as Izuu32 described, on one's own risk tolerance.
If this is high, I would only use enough equity to achieve 60-70% loan-to-value.
With low risk tolerance, I would use everything.

- How do others do it?
a) They do not build at all and live in rented housing.
Owning a house is still a kind of luxury.
b) Build cheaper, build smaller, more rural
c) Semi-detached house, terraced house
d) Buy a condominium
e) Take on higher risk with 100% financing

Thank you very much for the further food for thought.

In your list, there are actually quite a few points that really make me think, because I am still torn back and forth.

I was a long-time advocate of the rental model. Keyword: concentration risk. Now, with a child and family, you think about the overall well-being and see the perfect ideal world of a child who can play carefree in the garden of the house. Then there are also the many others in the surrounding circle of friends who have already taken this step.

On the other shoulder, however, sits the rational and down-to-earth saver. Why sink so much money into concrete and land?
Retiring early remains an illusion.

But speaking of retirement provision:
I have the feeling that with all those 100% financiers, there is usually hardly anything left for Riester or saving for retirement. Or am I completely wrong?

Children can also play in an apartment building with a garden. So that should not be decisive.

A question that is subtly implied here is:
What do you do with the money you earn?

One person buys expensive things, travels to exotic countries, another retires earlier, and for many, owning their own house is a fulfillment. Rational reasons rarely speak in favor of buying a house; rather, emotional reasons do.
The increase in quality of life, at least according to many homeowners, cannot be bought with money.

Regarding your last point:
They definitely have: Pillar 1) statutory pension (mandatory), some: Pillar 2: occupational pension scheme, direct insurance (depending on the employer) – Is anything done in Pillar 3? Maybe a few.

More importantly: Do they have Pillar 1?
Do you also have that (my question above)?

Best regards
ghost