Is building a house realistic for us?

Hello everyone,

after quietly reading in the forum for a long time, I would now like to ask you a question.

We have been dealing with the topic of building/buying a house for a long time, as our current living situation is not satisfactory in the long run.

About the situation:

We are a family with two children. Our current cold rent is €900 cold.
Our total net income is about €6000 net including [Kindergeld].

Now we have the opportunity to buy a plot of land in a good location for €130,000.
Our equity currently amounts to €40,000, of which we definitely want to keep about €10,000 as a reserve for emergencies (car broken down etc.).

Actually, we had imagined that we want to invest a maximum of €500,000 in the project, about €360,000 for the house including additional costs. This corresponds to a monthly installment of about €2000. After talks with architects, we are increasingly doubtful whether the project seems feasible for us under these conditions. We would like to have the loan paid off in about 20 years.

We had imagined about 160-180 sqm living space, as a third child might be planned. Is that too big? Do we simply have too little equity?
We don’t really have any special wishes. We can live well with laminate and plastic windows and don’t necessarily need underfloor heating or similar.
We would just like to have enough space for our family.

What is your assessment?

Trixi

Hello,

with a rate of €2,000 you mathematically won’t pay off a loan of €500,000 in 20 years. There always has to be a special repayment made from time to time. And as you already said, the additional building costs can only go higher. Please do not forget the incidental costs for the house, which can also amount to €300-400 per month including all maintenance, reserves, etc.

That means you might be debt-free at 61. Kids out of the house and you an XXL house.

You have to decide that for yourselves. Purely from the financing perspective, it will work out for the bank.

You can only answer that question yourselves.
Purely based on the data, it can work with 6000 net. However, we don't know how much of that remains per month. You definitely have to pay more than the 900 euros cold rent.

And keep in mind: With house costs of 360,000 euros, there is no cellar, no garage, and most likely no outdoor area included. Unless you can provide significant own work.
Of course, the price depends heavily on the desired equipment, but you don't have much leeway with the mentioned amount.

Your equity is not high, so I see it critically despite a decent income. It is also important to consider to what extent the income will decrease if a third child actually comes.

If I were you, I would create a household budget for 1 year. What expenses do you really have? What can be saved or flow into repayment? How high is the income in the "worst" case (3rd child..)?

The time should also be used to increase equity. I would aim here for 2000 to 2500 euros per month. Then you have almost doubled the equity to be contributed and at the same time tested whether this repayment rate would be feasible for you. Because much less than these 2500 euros will not be repayment + operating costs.

House size can of course also be reconsidered. With a clever floor plan, 160m² is generous enough for 3 children. If it remains at 2 children, 145m² is also generous.
By the way, we also hope for 2 or 3 children and built 160m². We are still alone and about 35m² are not used or only serve as storage rooms.

Thank you for your previous answers.

You are right, HilfeHilfe, the 2000 € monthly rate was planned for about 25 years. However, one of the bankers told us that he would only finance for 20 years because my husband is already 44, then we would be at around 2400 €.

How is it actually, do banks generally only finance up to retirement age? And how does it work when the partners are different ages?

Ideally, we would already build the house in such a way that the first floor could be rented out later. However, that also consumes additional space if you already plan a master bedroom on the ground floor.

We have not planned a basement, nor a garage, just a carport.

We would like to contribute own work, however we are not quite sure what besides painting, landscaping, chasing grooves, and cleaning the construction site we can handle. How much could one deduct in costs for these tasks?

How is it actually, do banks generally only finance up to the retirement age?

yes

You cannot deduct anything for the mentioned own contributions, since painting work and outdoor facilities are usually not included at all. "Chiseling slots"... helping the electrician with threading and maybe with groove cutting is sometimes possible if you subcontract the trade yourself and arrange it accordingly, but you probably can't save that much that way.

Occasionally clearing away trash is anyway the builder's task, as was extensively discussed recently in an enlightening thread here.

Thanks for your previous answers.

You are right, HilfeHilfe, the €2000 monthly rate was planned over about 25 years. However, one of the bankers told us that he would only finance for 20 years because my husband is already 44, then we would already be at about €2400.

How is it actually, do banks generally only finance up to retirement age? And how does it work if the partners are of different ages?

Ideally, we would build the house now in such a way that the first floor could be rented out later. However, that also consumes additional space if you plan a master bedroom on the ground floor already now.

We have not planned a basement, nor a garage, only a carport.

We would like to contribute some own work, but we do not really know what else we can dare besides painting, landscaping, chasing slots, and cleaning the construction site. How much could one subtract from costs for this work?

The own work you want to provide is rather minimally credited and only helps you shave off 0.05% on the interest rate.

Regarding retirement age: Banks have guidelines and calculate the loan up to zero and must accordingly consider your "fictitious" pension as income from retirement age onwards.

But as you already notice, maybe this is quite possibly a league too high.