Is financing a new single-family house feasible?

Everyone has to decide for themselves what they can do without. But personally, I don’t want to restrict myself so much just for a house. It should still be possible to go on vacation or fly twice a year. And even two weeks on a farm holiday aren’t cheap. For me personally, there should still be a surplus of at least €1,000 per month. And when you still spend money on vacations and you always spend more while on vacation than at home, not much remains as savings over the year. It’s not about always buying a new car, etc. But, for example, with less than €10,000 in savings per year, you don’t get very far with house repairs and buying new cars. But I’m probably too conservative.

The average family in Germany just doesn’t manage a monthly saving rate of over €1,000 even with a rented apartment, nor do they fly on vacation twice a year. And that was exactly my point. You shouldn’t always take your own lifestyle as a benchmark for whether someone else can afford building a house financially or not.

But yes, everyone naturally has different priorities. My luxury is that my wife can stay at home with the children and that we build a house where we feel most comfortable (even though, unfortunately, that is in one of the most expensive areas in Germany). Since our families are spread across several countries, we wouldn’t have enough vacation days anyway to fly somewhere else twice a year in addition to visiting relatives. But even if we did, flying twice a year on vacation and then really splurging clearly falls under the category of luxury for me. And with a new build, you don’t necessarily have to set aside several hundred euros per month in savings from the start.

You just always have to be aware of what luxury is and what is absolutely necessary. And when people here advise against projects, it is often from those whose lifestyle consumes significantly more money than that of an average German. But there are simply people who are quite willing to restrict their lifestyle at least temporarily if it means they can fulfill their dream of owning their own home. My grandparents didn’t have a bathroom in their self-built house for the first few months, and my grandfather had to walk 20 km back and forth at least once a week to help his sister because there was no money for a car. Of course, times have changed and we can’t use the lifestyle of our grandparents as a benchmark, but many here seem to live in some kind of prosperity bubble and don’t even realize that much of what they consider normal is simply pure luxury.

My luxury is that my wife can stay at home with the children ...

I completely agree with your post, but I wonder if your children feel the same way. For example, I would have preferred to have my dad around me all day rather than my mom. But then again, I am also a "Deandl". ;-) Don't worry, this is a rhetorical question, I do not expect an answer. ;-)

I fully agree with your post, but I wonder if your children feel the same. For example, I would have preferred to have my dad around all day rather than my mom. But then again, I am a "Deandl". ;-)

Don't worry, that's a rhetorical question, I don't expect an answer. ;-)

Oh dear, that really wasn't meant the way it probably sounds. I simply meant the luxury that both parents don't have to go back to work right away. It would be nice for me, too, if I could stay home with the kids.

Our children usually find the parent who's currently not available cooler anyway. :)

Our children usually find the parent who is currently not available cooler anyway. :)

That is probably the reality. The parent who is not currently available does not annoy, is generous, understanding, lenient, compassionate ... :)

Well, the perception of luxury varies from person to person. We go on vacation at least twice a year, and we've gotten used to that. Nevertheless, when it comes to home financing, you should never calculate too tightly. And if at the end of the month only about €300 are left, then that's just not enough. You can see that especially with the high inflation right now. Just having a longer commute to work can quickly eat up the €309, leaving nothing left over. You shouldn't be too naive about it. And always keep an eye on the remaining debt and when it will be fully paid off. I suspect that households who chose a 1% repayment rate years ago and will soon have to renew the loan will have a rude awakening. Then it will probably be the end for many…

You can see it right now with the high inflation. Just having a longer commute to work, the €309 quickly disappears again and there’s nothing left over. You shouldn’t be too naive about it. And always keep an eye on how high the remaining debt is and when it will be fully paid off.

I suspect that households who chose a 1% repayment rate years ago and soon have to renew the loan will be in for a rude awakening. Then it’s probably over for many…

Yes, and many started out with 1% repayment, low equity (100% financing) and interest rates below 2% – you can always sell at a profit. If now the interest rates for the follow-up financing are higher, the remaining debts are still high and the amazing book values from 2021 cannot be maintained, it will be tough. At the same time other budget items also come under pressure, like mobility (2 cars, living further out, everyone drives daily) or simply food.

Otherwise, nobody is saying that you have to have €3500 “left over” to be able to build/buy something. But there is a rule of thumb that you should not spend more than 33% on housing. With high household incomes it can be more, but ultimately 40% is the absolute limit. And sensibly that is then complete, not just interest plus repayment, without additional costs…

Of course it is ideal if the loan installment only makes up a third of the household net income, because then you don’t have to give up anything despite building a house. But those times are simply over for most people now (by the way, in metropolitan areas like Munich, those times have long been over even for high earners).

That rule does not exist because you wouldn’t have to give anything up then – you would then be at about 25% or less of income on housing – like in the past. That rule is meant to protect from ruin, because with your strategy you’re quickly at 50% for housing. Then in a recession + job loss of one of the two necessary earners, it quickly gets grim. And that’s exactly what this is about. If both are civil servants, it may play out differently.