Is construction on the existing property feasible or is it better to wait?

  • Erstellt am 2020-08-07 08:19:09

Maze2020

2020-08-07 08:19:09
  • #1
Hello everyone,

I am Maze. Until now, I have always been a silent reader. But now I would appreciate an assessment from you experts on whether our planned construction project is feasible at all or if we should wait. A few years ago, we bought a small older house (remaining debt approx. €90k), renovated it, and now want to build an extension here (age-appropriate, all on one level).

About us:
Net income together approx. €5,800 / month
No children and none planned anymore
Expenses:
Living expenses approx. €1,000
Loan payment for remaining debt approx. €650 (still running for 8 years)
Insurance, gas, electricity, garbage, car, fuel, phone, and other costs approx. €1,200
Current savings rate after deduction of all ongoing costs €2,600

Equity: unfortunately not much available (approx. €15k) because we put most of it into the house and renovated everything step by step

Our construction project:

We want to build an extension on our existing house (currently 80 sqm) on the ground floor to gain an additional approx. 90 sqm of living space on this level and make everything age-appropriate.
A cost estimate from an architect amounts to approx. €210,000 (extension, roof, façade, windows, bathroom, new heating system, etc.) plus €30,000 ancillary construction costs.
Since we are fairly cautious people, we have planned an additional buffer of around €30,000
which makes a total volume of approx. €270,000.

First offer from the bank is at 0.99 % for 15 years (unfortunately as a subordinated loan because the house purchase loan is not yet fully paid off). Planned monthly burden is max €1,500 (interest + repayment).

We are currently unsure whether we should undertake the project now due to our low equity or rather wait and save a little more equity (this was not really possible so far because we put all leftover money into the house). However, interest rates are currently very favorable and no one knows how they will look in 2-3 years.
Thank you very much in advance for your advice.
 

Altai

2020-08-07 10:18:40
  • #2
Such a deeply relaxed starting position is rarely seen here. I think you can get started immediately.
 

Maze2020

2020-08-07 10:29:10
  • #3
Hello Altai,

thank you for your feedback. We are just uncertain because of the low liquid assets. When I read here what some hold for "liquid" equity capital, unfortunately we cannot keep up.
 

Scout

2020-08-07 13:42:10
  • #4
Equity is the market value of the house minus 90 TE. And a subordinated loan at 0.99% is awesome! I wouldn’t worry about that.
 

Maze2020

2020-08-07 14:24:53
  • #5
Hello Scout,
thank you for your feedback as well. That reassures us now, we had always assumed that equity capital must always be "liquid" in the bank and that they place extreme value on that. Apparently, we were wrong. I don't know the current market value of the house exactly, the purchase price was around €250k back then plus what we have put into it over time. Then we will get in touch with the bank and see where we end up.
 

Tassimat

2020-08-07 19:20:57
  • #6
It doesn't matter how little equity you have, because you have a high income. That compensates for quite a lot. Disability benefit 2600, planned annuity 1500€. Great thing. I also really like that you set the construction costs nicely high and then added a buffer on top.

Altai summarized it beautifully:
 

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