Is the construction project affordable?

Hello everyone,

I may be the estimated 100,000th person to post such a request here, but after long browsing I am absolutely impressed by the constructive contributions of the members and would also like to read your opinions on our planned construction projects and the associated financing plan.

We are both in our mid-30s and have a one-year-old child. A second child is not planned. Our current income is a secure 4,500 euros with potential increase in the coming years.

After a long search, we found a plot here in West Saxony that we want to buy. We are paying 110,000 euros for the 1,000 sqm including incidental acquisition costs and will finance this completely with equity.

Afterwards, we want to wait about 1 to 1.5 years for our construction planning and land preparation. A garden shed still needs to be demolished and tree felling etc. will be done as own work.

We plan a solid (masonry) house (with or without a basement) with 150 sqm living space. I estimate construction costs of about 1,800 euros/sqm for building a basement. That results in 270,000 euros construction costs. Additionally, I budget 40,000 euros for ancillary construction costs and 30,000 euros for interior finishing and outdoor facilities. Fence and boundary vegetation exist and should mostly be preserved. Also, through own work I therefore expect not so high costs for the outdoor facilities. Plus a 10,000 euro buffer results in a loan amount of 350,000 euros.

I have calculated back and forth forever whether and how we can service the loan. With a fixed interest rate for 20 years and an estimated interest rate of 1.8%, we want to have repaid it in 30 years, i.e. by retirement, with a repayment of about 1,300 to 1,400 euros.

My question to you. Is that realistic? Both regarding construction costs, but especially the repayment. I calculate with an underlying income after deduction of provisions of 3,900 euros and thus come to a repayment rate on income of about 35%. Do you see problems? In the monthly calculation I have generously budgeted buffers of about 600 euros, whereby reserves and acquisitions are already deducted.

Since we have not yet obtained offers for the construction, I do not know if I have calculated the construction costs correctly. Ideally, of course, we would like to finance less than 350,000 euros, but I tend to always lean toward a rather cautious and pessimistic calculation. Does anyone from the region have experience with this?

Thanks in advance for your answers.

270,000 for a 150 sqm house is doable. A garage or basement is not included in that. 80,000 for everything else is also ambitious (including reserve), unless you are able to save a lot of additional money during the construction phase. With a bit of bad luck, it won’t be enough for a reasonable double carport with a shed. Please keep in mind that planning quickly becomes really expensive. In the end, you have to decide for yourselves whether you can guarantee paying 1,400€ every month. Looks like 2% repayment, we did that too. 20 years is certainly a long time, during which you will have peace of mind and possibly still have options to react to increased interest rates or similar in 10-15 years. If you are ready for financing such an amount, contact the construction companies and start finding out what costs how much. Do NOT sign anything. Since you have a plot of land ([Eigenkapital!]), companies will want to advise you properly and explain which house type fits best there, etc... You can also inquire with the utilities about the cost of connections using the plot. But that is already very specific.