Loan for new construction - feasibility, recommendations

Hello everyone,

briefly about the current situation:

- Me, male, 26 years old, electrical engineer with permanent employment and a net income of 2,200 (regular increases)
- my partner, 23 years old, nurse in the emergency room of a university hospital with permanent employment and a net income of 2,100 (regular increases)
- children planned 1-2, but not for another 4-5 years
- together currently about 4,300 net
- currently living with my parents in a small granny flat and only paying low additional costs
- monthly expenses about 1,400 euros
- equity currently about 85,000 euros

now about the wish:

- plot of land in Saarland or neighboring West Palatinate (400-500 sqm basically sufficient for us)
- single-family house, solid construction, 1.5 stories, without basement, nothing special, about 150-160 sqm
- monthly payment of 1,200-1,300 euros => realistic???

current status:

- we have been at the company Spektral and have prepared a preliminary cost estimate with approximate prices:
* 268,000 euros = house 162 sqm, turnkey (except floor and wall coverings) as KfW 55
* 10,000 euros = house connections
* 15,000 euros = floor and wall coverings
* 15,000 euros = outdoor facilities (at first nothing special => mostly probably done by ourselves)
* 15,000 euros = buffer for earthworks, foundation special features, unforeseen expenses
* kitchen and furniture mostly available
=> total therefore almost 330,000 euros

- we are currently searching for a plot of land. Here we actually want to stay below/around 80,000 euros including additional costs
- equity as mentioned 85,000 euros, although I would only like to use 60,000 euros here

=> so this makes a loan amount of about 350,000 euros => realistic???

So far we have been with the Sparkasse and Bank1Saar (Volksbank). The Volksbank now initially had the better offer as follows:

* KfW 153 loan over 30 years: 100,000 euros at 0.75% for 10 years with a rate of 319.83 euros and a residual debt of 71,258.19
* KfW 124 loan over 25 years: 50,000 euros at 0.75% for 10 years with a rate of 189.76 euros and a residual debt of 32,295.70
* bank loan over 10 years: 200,000 euros at 1.17% for 10 years with a rate of 700 euros and a residual debt of 135,745.69
=> an interest rate fixed for 15 years is offered at 1.57%
=> after 10 years results in a residual debt of about 240,000 euros

Now I unfortunately have little experience or knowledge regarding financing, etc.
- Does financing in this form make sense?
- What could be changed/improved?
- Which banks can I still approach?
- Is it better to choose a longer fixed interest rate for the bank loan?

I would be very grateful for any opinion or tip here.

Thanks and best regards!

1-2 children, wife then possibly part-time after a short parental leave => 3300 net - costs for the kiddies, which increase over time.

Whether it is still 2 or 5 years until then does not matter, unless the loan is paid off in 2-5 years. This must therefore be taken into account.

Now I have little experience or knowledge regarding financing, etc. - Does financing in this form make sense? - What could be changed/improved? - Is it better to go for a longer fixed interest period with the bank loan?

No, financing does not make sense. A 10-year fixed interest period is a very high risk that you cannot offset with your income. In 10 years, you plan to have small children. For the non-KfW portion, take at least 15, better 20 years.

- Which banks can I still approach?

Try institutional and independent brokers.

Depending on where you live in Saarland, I can recommend Mr. Schmidt from Interhyp (SB or SLS). And take a closer look at the costs. With Spektral, as with others, there are quite a few additional charges that are not immediately obvious. According to the motto "small change also adds up"... You get a feel for it when you go to other companies and then compare the construction service descriptions with each other.

I agree with Tassimat. Try to get at least an interest rate fixed for 20, preferably 25 years. Keep the annuity as low as possible and use special repayments. If the loans expire in 10 years, you might be financially worse off (Fau in part-time + 2 children) and the interest rates will not improve.

If you want to build securely, proceed as follows:
1. Search for a plot of land and continue to save equity
2. Acquire the plot and design a suitable floor plan for the house, garage/carport
3. Inquire with house building companies with your ideas and secured plot. You should also deal with the topic of additional costs in advance. For example, add +100,000 EUR to the pure house costs and plot cost, then you have roughly your total costs. Here you might be able to reduce something if you build without a garage or add a few euros if your plot is not level or has other obstacles. A soil survey is never wrong!
4. Compare the offers. This works best if you have decided on a house type and construction method (solid, timber frame, etc.). This way, you can better compare the individual services. Often, sympathy also plays a role in whether you like the company (not just the sales person!)! Personal experiences your friends/acquaintances share with you are worth their weight in gold here!
5. Contact financing brokers and request rate offers. Determine the rate that suits you (max. 30-35% of net income as a guideline), but also think about the total term of the loan and that a residual debt after the fixed interest period remains manageable.

Between 1-2:
The offer from your Volksbank has too short an interest rate lock and the residual debt is far too high! I would acquire the plot with the equity. The plot will later be included as equity in the financing. You are still young, so continue saving a bit on the side. If there is no building obligation registered on the plot (which unfortunately is less common nowadays), you can aim to accumulate about 20% equity as liquid funds (savings account). With this, you then try to get a loan-to-value of <80% to obtain good conditions.

In your planning, you should actually make sure that your loan installment can be covered by the salary of the main earner in order to consider parental leave and part-time work of the partner.

Tip: Also check your creditworthiness or Schufa entries AND do not sign anything prematurely