It doesn't work without equity - experience!

Hello, a little tip for future home builders about our experience

Originally, we wanted to build a house for 250,000 plus 100,000 for the plot including additional costs = 350,000 all-in total volume without kitchen with 45,000 in savings. Since 20,000 goes to the kitchen and a second car, that effectively leaves 25,000 equity.

After talks with various homebuilding companies and financial service providers and being positively influenced by the low construction interest rates, the desired plot was quickly purchased with a variable interest rate and an architect was commissioned.

Now our house, in the size, construction method, and equipment that is just acceptable for us, will cost about 100,000 more... wish versus reality!

In the meantime, the equity unexpectedly increased to 50,000 through fortunate circumstances and I was able to borrow another 20,000 as a loan from my parents. Only then did we get approval from the bank with the most favorable conditions for us, but even here 20,000 less credit than we wanted. Despite a secure and comparatively high income. That means the garage and possibly other things will have to wait for now.

The monthly payment will be about 1,700, so no small matter.

Since we had already bought the plot (with variable interest) and commissioned the architect before the final financing, we can now consider ourselves very lucky that it did not go wrong and we are not stuck with an expensive meadow.

The building application is approved and soon it will start.

Since we had already bought the land (with a variable interest rate) and commissioned the architect before the final financing, we can now count ourselves very lucky that it did not go wrong and that we are not now sitting on an expensive meadow.

I hope potential builders interpret your statement in such a way that nothing should be purchased before the house price and financing are finalized! Rhenish regards

Of course, it is possible without equity. It is just more expensive. Therefore, we had the calculations done before purchasing the land to see if it was worth saving equity, but with the current interest rate situation trending upwards, it is not worth it at all.

Of course, it also works without equity. It’s just more expensive. That’s why we had it calculated before buying the land whether it’s worth saving up equity, but with the current interest rate situation trending upwards, it doesn’t pay off at all.

Someone who wants to finance an amount of 250-400k without any equity, not even for incidental costs, should question why they have no equity and whether they can afford the financing.

Property = immobility
Rent = mobility

We are not in the USA where you quickly sell your little house if things don’t work out.

Arguments like “I have a great job with salary increases” or “I’m a civil servant, so I don’t need equity, that’s safe” should also be questioned. Both are assumptions about the current state and the future.

Well, when you have completed a degree, it is not exactly normal to have a huge amount of equity. This has nothing to do with a great job. I do think having some equity makes sense, but with an expected interest rate increase, that balances out. At least for the costs before the actual construction financing, you should have something saved up.

Exactly that is what I see as THE problem, why for sure in 10-15 years, as soon as the current financings (with a super low interest rate) expire and the refinancing is due with possibly instead of 2-3% e.g. 5-6%, a large part of the builders will no longer be able to afford it (missing equity certainly also plays a role because everything is calculated down to the last cent.

When you often read in the forum that builders with an income of about 4000-4500€ (currently still without children, but wishing for 2 or more there) want to pay off 1500 euros per month, at least my jaw drops.

But none of us can really see into the crystal ball..