If 2000.00 € remain - build a house or not?

Hello dear house-building experts,

my girlfriend (22) and I (25) are considering building a house.

At the moment, we both live in my apartment, which is located on the upper floor of my parents' house; therefore, we have no rent costs.

Together we earn €3345.00 net. From that, about €280.00 for my company car is deducted. So we have about €3050.00 net available.

I have drawn up a household budget and come to the conclusion that, with all expenses (car, insurances, "luxury," eating out, cinema, excursions, clothes, etc. etc.), we have about €2000.00 net available per month.

Now my question: how much net do you have left per month? (all costs deducted)

Then another question: how much net do you have left and how much of that is actually interest + repayment?

Thank you very much

Is the budget based on facts (so was it kept for a few months) or estimates?

Relying on the experience of others is practically not possible. Everyone lives differently, there are regional differences, with children or without.

After deducting all costs, we planned to have an average of 300€ left per month. Currently more, since we are still paying rent. But that is lower than the loan repayments starting next year. Then everything is deducted. From garbage fees to vehicle tax and kindergarten meal money to PayTV and reserves for the car, repairs, etc...

But that won't get you any further. The income is also significantly higher.

Managing with 1000 € per month, even without paying rent but including all luxuries, eating out, cinema, etc., I find ambitious. But it certainly depends on our lifestyle.

Hello rwurzer,

are you sure you have considered all costs?

You have the large item "car" as a company car.
Here you should note that with a longer commute and taxation according to the 1% method, the taxation also increases.

If you have a second car, you should also consider depreciation. You can easily allocate 200€-300€ for replacement. Have you also accounted for repairs, tires, etc. for the second car?

When building a house, additional insurance (disability insurance, life insurance) is often taken out as a precaution, if not already existing. Then there is also retirement provision.

I do not find any vacation in your list. Despite building a house, we want to have a vacation every year and see the world.
You can certainly take small vacations, but we would not like that permanently. We have allocated about 250€ just for that.

Please also do not forget the remaining repairs/new purchases of household appliances. This year the refrigerator, next year the washing machine, etc. Something always breaks down.

What is also often forgotten are birthday/Christmas presents for partners, friends, and family. Over the course of the year, that adds up as well.

When you come fresh from university/training, you get by with relatively little money.
But that gradually changes. At some point, you don’t want to eat packaged sausage from A..i, L.dl and the like anymore, but go to the butcher. For cheese, you also don’t want just simple Gouda all the time. Here 20 cents more, there another 10 cents, that adds up. Eventually, you are no longer satisfied with the furniture from your student apartment.

Then many additional incidental costs come up. (Garbage, water, home insurance, property tax, electricity, heating, chimney sweeper, etc.) Banks often assume 2€/m². I expect more. Plus maintenance for the house.

What about children? Planned anytime soon?
Costs go up there and income goes down.

Our child is due soon. Then we will have roughly 3200€, now a bit more. A company car has already been deducted there.
We do not live extravagantly and both watch our money, but considering all costs and reserves, we have far from 2000€ left over. We decided on a rate of about 900€. Whatever is left then will be paid off early.

Hello Musketeer,

thank you very much for your detailed answer.

Yes, I have gone through the household budget several times and have reviewed recurring bills. The costs should be correct.

The large item "car" is accurate: I drive a company car. However, since only the 1% rule applies to me (I have no regular workplace), the costs are fixed. This could change in the future, though. Then I might have a regular workplace.

For the second car, we have already included many costs, of course these are all based on estimates since you never know if a repair will be necessary or not. But it is included. What we have not included are the 200-300€ for replacement, since that would then be eliminated. If the second car is broken, I can lease a car cheaply through employee leasing (including taxes, insurance, tires, maintenance, etc.) and don’t have to buy a car for 10,000.00 €. We still have a monthly expense, but it stays around the current amount (the second car is a Polo and would be one again).

Disability insurances are in place. Neither of us has life insurances; we will not take out any either.

In general, I think we only have the really necessary insurances. These are disability insurance and private liability insurance. My girlfriend still has a building savings contract, which I do not, for example.

Of course, there will be more costs, but we cannot estimate them concretely yet because we have not agreed on the energy plan for our house and do not know which construction method we should prefer.

I also estimate about 300-400.00 € for additional costs (is this realistic? - my parents calculated about 500.00 € additional costs per month; but they have an older house). I hope newly built houses are more energy-efficient.

What do you actually pay for additional costs?

Yes, offspring is planned, but only in five to six years.

We would really like to have a house and believe that we can spend 1200.00€ - 1500.00€ (interest + repayment including all additional costs).

We simply made, let's say, a "milkmaid’s calculation": whether we now spend 1000.00€ warm rent + 500.00€ into a building savings contract or whether we invest 1500.00€ including all additional costs directly into our house is somehow the same for us.

We are still very young (some even say too young to build). But I think that our age might even be an advantage because we can spread the repayment over a longer period.

Of course, it would be nice if the house was paid off in 25 years. But we were at a house exhibition and consulted with an architect there. Since we will not have a plot of land, we probably won’t get around the sum of about 400,000.00 €.

The land costs about 100,000.00 €. That leaves "only" 300,000.00 € for the house. I think that’s not very much anyway when you consider that you also have to furnish the house (please correct me if I am wrong).

I am lately also a foe of "building with equity". Of course, 95% of banks require that you have a certain amount of equity. But there are also banks that do 100% financing.

I just don’t see the possibility of saving 50,000 - 100,000 € in the next 5-6 years with an apartment and insurances.

Since the interest rate is at a low point, it can only go up. Then the interest will eat up my existing equity anyway, won’t it?

Isn’t it better to build immediately then? (assuming you get the money and the repayment + interest would be affordable)

Many thanks for your answers

rwurzer

An enemy of building without equity? Aha.

Although interest rates are low, the construction/land/property prices are high.

With a €400,000 loan, you will hardly manage with your €1,500 for installment + additional costs, and if you do, probably only with 1% repayment.

No equity, hardly any repayment... what if children come and one income disappears? Then it might even be difficult to cover the previous installment. Then it gets really bad.

Regarding the income in connection with the financing requirement, I would decide against buying a home.

Financing with long terms is not unusual in house construction. But there is an often underestimated difference between "term" and "fixed-interest period." After the fixed interest period, there is the follow-up financing. If you repay only one percent at first at that point because interest rates are high, the term shifts significantly to the back again.

Interest rate and repayment amount change with every transaction to the bank. The payment amount stays the same.

I have calculated many scenarios for us and there is really a lot to consider.

I was once recommended by a banker from the circle of acquaintances: "€500 repayment (interest + principal) per €100,000 loan amount." (Example: €400,000 loan -> €2,000 repayment to the bank)
For a while, I also thought: "I don't want to admit that."
Now I recommend it. Especially if you don’t want to pay back to the bank your whole life.

We will probably need €300,000. That makes €1,500 monthly to the bank. Plus additional housing costs.

Less is certainly possible, but then I will face the same problem after the fixed interest period. With the difference that I no longer have the choice between: can I afford it or not. But only between: do I someday pass on my debts, forced auction, or grit my teeth and hope and pray.

Just to keep it in mind: With only one percent repayment, it can happen that after 10 years more than €250,000 is still outstanding (with a €300,000 loan!) Far too much remaining debt for 10 years gone by already. My opinion.

I recommend: Write down ALL costs.

Starting with fixed costs: reserves, insurance, [GEZ], subscriptions, basic phone, car, etc. etc.

Then filter the months what was spent on food, hygiene, etc. (when I did this, I was surprised).

It may hurt if the calculation shows that you simply (maybe still) can’t afford your dream. If you look at it realistically and soberly. That is hard, but better an end with a fright than a fright without end.

Cooking the books just looks nice. I had that phase too. Wow, there was still money left, I didn’t even know where to put it. Realistically considered, it was unfortunately not actually available.

I don’t want to talk you out of it, everyone can do what they want. But I speak from experience. When the idea of building came to us, my income was much lower, my wife also had much less, our daughter was not born. Now, much more income and still less left over…

What we do not spend today on additional loan costs is put aside next to all other expenses and reserves.

Good luck.