New construction with existing debt - feasibility question

Hello everyone,

we have an option on a plot of land in a very sought-after location and since child number 3 is now here, an "expansion" of the house would be unavoidable. (We all want to be able to sleep on one floor). The house is 150sqm but on 3 floors.

Four years ago we bought a used house with two residential units which we completely occupy. (150sqm)

Took out a loan of €350,000 with €100,000 land charge on a third-party property. Still paying €1600 per month for 18 years via a building society combination.

The plot will cost us €200,000 including purchase incidental costs. House construction currently without garden work is about €500,000 +-40,000 depending on the developer. I assume a loan of €500,000. We will have to manage the rest ourselves somehow.

We earn €6,000 plus €2,000 net per month plus about €10,000 net bonus per year.

We currently have equity of €25,000 for the plot. Of course, we want to sell our house. In doing so, what we have already repaid (about €50,000) will remain as cash for us after a sale above the loan amount of €350,000 for the garden work. We also calculate about €50,000 for that.

We have an apartment that we rent out. This must not be sold, but can be encumbered with €100,000.

I would now like to ask if anyone has ideas on how we should proceed best and whether it can even work at all.

Now to the forum’s questionnaire:

General about you:

[*]Who are you? Family with three children from the Palatinate
[*]How old are you? 30, 30, 6, 4, 1
[*]Are there children? Three
[*]Are more children planned? No more, but I have already said that twice
[*]What do you do professionally? Software and teacher (part-time)
[*]Are you employed, self-employed, retired, housewife, househusband etc...?
[*]How many hours do you work? 40h and 50% teacher

Income and asset situation:

[*]What income do you have (gross/net)? €8000 net
[*]How much child benefit is there? €618
[*]Other transfer payments like parental allowance, sickness benefit, etc...? None
[*]How much equity do you have? €25,000
[*]How much of that equity do you want to invest in the house project? All

Expenditure situation:
Expenditures already included in other items can of course be omitted. This list is not final and can be expanded or summarized as desired. Please make sure to indicate all costs monthly, even if they only occur annually!

Housing costs:

[*]current cold rent €1600 bank installment for own home
[*]current warm rent €450 ancillary costs
[*]Electricity Included in ancillary costs
[*]Gas Included in ancillary costs
[*]Water, sewage, garbage fees, street cleaning Included in ancillary costs
[*]Telephone, internet, mobile phone Included in ancillary costs

Mobility costs:

[*]Monthly ticket for bus and train (also for the children!) None
[*]Car loan (or savings rate for new car) €400/month
[*]Insurance €800/year
[*]Taxes €350/year
[*]Fuel €100/month
[*]Repairs approx. €800/year
[*]Other
[*]Is there a second car, motorcycle, scooter? Please list all points again!

Insurance costs:

[*]Private health insurance (also additional health insurance, daily sickness benefit etc.) €300 PHI/month
[*]Liability insurance (also animals) €10/month
[*]Capital or term life insurance €20/month
[*]Pension insurance (also Riester, Rürup, etc...) €150/month
[*]Disability insurance None
[*]Accident insurance None
[*]Household insurance None
[*]Legal protection insurance €30/month
[*]Other insurances (e.g. travel insurance, funeral insurance) None

Living expenses:

[*]I have other budget items not listed here, but have consistently followed these for 4 years: €2500

Savings:

[*]Have a savings account on which I currently deposit €1500/month without pain and partly invest in securities.

Other expenses:

[*]Maintenance payments? None
[*]Loans? €250 kitchen and iPad
[*]Other?
[*]Was anything forgotten? Then indicate it here at the latest!

Income and expenditure totals:

[*]Total income €8610/month
[*]Total expenses €7100/month
[*]Balance
[*]Of which total cold rent and dispensable savings (e.g. savings rate for house)

General about the property:

[*]How big is the plot? 600sqm
[*]What are its dimensions? 16*38
[*]What is the standard land value? €350/sqm
[*]New build, old building (year built), house type? New build
[*]Garages? One
[*]How big is the house? (living area / usable area) Planned 200sqm plus habitable basement
[*]What market value do the plot and house have after completion? Hard to estimate. I know nothing about the real estate market.

Construction or purchase costs:

[*]Plot costs €200,000 incl. purchase incidental costs
[*]House construction by construction company incl. incidental costs €500,000
[*]Outdoor facilities/terrace, paths, garden design, fences etc... €50,000
[*]Financing costs (e.g. fees or commitment interest) No offer received yet. Still unclear how to handle the ongoing loan for the home / must handle
[*]Total costs €750,000

Other costs:

[*]Kitchen costs €15,000
[*]Furniture, lamps, decoration Initially no new furniture planned and will be purchased gradually from ongoing salary.
[*]Other "non-acquisition, acquisition incidentals, construction or construction incidental costs"

Cost summary:

[*]Total costs €750,000
[*]Deductible equity €25,000 for plot purchase. I would save up €20,000 again if I start construction in a year. €50,000 when I have sold the current house.
[*]Financing amount €175,000 plot plus €480,000 house construction. No idea if you split or take together. I think splitting marries me to the bank, but I think I am already married to my bank, as that is the only way I can expect leniency to get out of the existing loan.

Phew. So the oldest child is 6. The youngest is 1. That means the oldest can already, or certainly in the near future, sleep on a different floor and the youngest still with you. Honestly, I would just stay in the old house. 150 m2 is enough for five people. Why is this such a big problem for you?

Phew. So the oldest child is 6. The youngest is 1. That means the oldest can already sleep on a different floor now, and certainly will in the foreseeable future, while the youngest still sleeps with you. To be honest, I would just stay in the old house. 150 m2 is enough for five people. Why is the pressure on you so intense?

It is really badly laid out. We simply didn’t know what we wanted and bought it more because of the location. It has a lot of small rooms. Living room 17 sqm. Dining room 15 sqm. Kitchen max 9 sqm, etc... as I said, we were young and didn’t really know what we wanted. The garden was nice. Friends live nearby. Price was good and financing was quite good.

Now we definitely want something else and renovating with three small children in the property seems terrible to me, and the investment will never be reflected in the property price. The new building is worth more than the investment as soon as you move in.

New construction is also stressful. I would never go into such heavy debt just to be able to sleep on one floor. At the latest from the teenage years, the oldest child will appreciate having some distance. What if one income fails (illness, short-time work)? Keep your old house, maybe tear down a few walls for larger rooms.

Well, on paper everything is doable with that Netto. But having almost no equity with a monthly income of almost 9k and financing kitchen and iPads (!?!?) just doesn’t add up at all. Where is all the money going? Are you familiar with prepayment penalties? Not much will be left from the sale.

Building new is also stressful. I would never get so deeply into debt just to be able to sleep on one floor. At the latest from teenage age, the oldest one is happy to have some distance. What happens if one salary fails (illness, short-time work)? Keep your old house, maybe tear down a few walls for bigger rooms.

Well, the thing is that my salary is the main source covering any financing anyway. Whether I have to sell the house now or the new build makes no difference, as long as I don't make a loss.

I can draft floor plans of the current house. Then you'll see it's simply suboptimal. I also mean that it's just not comfortable. It is not well insulated. It has normal radiators. The stairs are positioned in such a way that you don't gain much by tearing down walls. There is no terrace and no ground-level exit to the garden. I could go on. Many things break here and constantly have to be repaired, etc.

We didn't have more budget back then and took it. In the end, that was also more sensible than renting, because the house is now worth more and no one can take away what we have paid off for now.