Ideas for home financing in about 4-5 years sought

Hello everyone,

We plan to build a house or rather buy one in about 4-5 years. Unfortunately, we don’t have much knowledge about financing something like this.

Briefly about our situation:
- She 23, He 21, 1 child, 2nd possibly planned in about 2 years
- Net income She: €800 working part-time, if both children go to kindergarten also full-time
- Net income He: currently €2000, company car, tendency rising, in about 4 years should be around €3000.
- Rent €600 + €250 additional costs
Currently no equity, we are still "somewhat" young and through our child suddenly entered adulthood with our own apartment, furnishings, etc. At the moment we put aside €200 - €300 per month, which should increase significantly in the future depending on salary developments.

Total net income at the start of construction in 4-5 years (rough estimate without rose-colored glasses): approx. €3500 maybe more.

House "requirements":
- approx. 140 sqm living space with at least 5 rooms
- basement or other storage space (room at garage, attic, etc.)
- plot about 500 - 700 sqm
- equipment does not have to be anything special
- garage or carport

Since building plots are very expensive here in the Hamburg suburbs, 500 sqm from about €200k, it will likely be an existing property. This has, I think, some advantages but also a few disadvantages we can (have to) live with :-).

Prices for the above house (existing property) approx. €300k - €350k
Additional purchase costs (property transfer tax, notary, realtor): approx. €50k
Renovation/adjustment depending on condition: €30k - €50k
Buffer: €30k
In the ideal case thus around €430k

I’m calculating equity by the time of purchase at about €30k but it could be more.
So about €400k to finance.

Do you think this could be managed with the assumed salary in 4-5 years? Of course no one knows how prices and interest rates will develop, but calculated at the "current" level?

I somehow see the whole thing as hopeless...

Sorry this got a bit long :-)

Thanks for your assessments.

Best regards
Nils

Initially, with the planned equity, you are financing over 100% of the purchase price. Therefore, many banks will already be excluded, and your interest rate will also deteriorate drastically. So either save more or the house price must be lower so that at least this can be paid.

Don't forget kitchen and other equipment, which also requires a considerable amount of equity.

If you get 400,000 at an interest rate of 2.5% (fictional) and repay 1%, you have to pay €1,166 monthly just for the installment. And in my opinion, that is the lower limit in your case. Whether you can afford it - your decision.

Calculate monthly warm costs then with at least €1,450 for house expenses.

If you get 400,000 at an interest rate of 2.5% (fictitious) and repay 1%, you have to pay €1,166 per month just for the installment. And in my opinion, that is the lower end in your case. Whether you can afford that - your decision.

1% is negligent.
Calculate a total rate of 4.5%-5%. Altogether about €1,666/month + additional costs + reserves.
In total around €2,300-2,400 for the house (based on the current status).
There should then be about €5,000 net income for both in total.

At €400,000 that is correct, significantly more should be repaid. I just wanted to show him the minimally required amount, and even that seems hardly possible.

Hello,

unfortunately, the crystal ball is in the workshop. So save save save. No one will tell you what the interest rate level and property prices will be like in 5 years in the Hamburg area.

Whoever can do that is a liar.

Apart from the fact that you are still very young and, like everyone at this age, not able to make big life leaps with property without equity, there are far too many unknowns here as well.
Probably the salary of the woman, your salary, Nils's salary, as well as the equity.
There is no crystal ball in real life, so for now just: save, keep a household budget, and set (achievable) goals.
One should not exclude affordable rental apartments either - they are very good for testing discipline in homeownership including a garden, and you are more flexible when selling if there are professional or personal changes.
Because I wouldn’t see that as fixed at your age yet, even if you currently have a permanent job.