New construction with existing parental house - how to finance?

Hello dear forum members,

my wife and I would like to fulfill the dream of owning our own home. My wife owns a single-family house (parental home, value approx. €250,000), in which we currently live with our 2 boys, but we are not really satisfied with the location and layout. This house has no encumbrances. We have now set our sights on a plot of land in a new development area and have already reserved it provisionally; the total costs amount to roughly €35,000. The house, which we will basically build almost entirely ourselves except for a few trades, is planned as 1.5 stories with a double garage, gas heating, just under 200 m² - upscale standard. Due to some vacations and new cars, as well as various renovation measures on the current parental home, we have only little equity, currently just under €10,000.

Our incomes: I, civil servant, higher service: net €3,500 - will rise to €4,000 in the next 5 years my wife, part-time in sales: €600 (child benefits + maintenance for 1 child she has additionally, but we do not take this into account in the planning)

We currently save about €1,500 per month

We are generously calculating roughly €350,000 for everything together (realistic despite own contribution?)

We would like to build the new home without time pressure and only move in once everything is finished. During this time, we want to stay in the current house and sell it after moving - renting it out is not an option for us.

An initial conversation with my house bank (Sparkasse) gave me only little interest from the bank in our project, so we do not really feel well taken care of there. Now we are considering consulting an independent construction advisor - sensible?

How do you assess our parameters and what is the best way to approach the financing? Is the existing house counted as equity, should the existing house be leveraged or are we even forced to sell it in advance?

Thank you in advance for your answers and I look forward to constructive criticism/suggestions.

Hi Sonic,

so you and/or your wife (! Have you settled that between yourselves?) have equity of 250k. That’s already a great starting point.
How you handle the existing house, there are different ways. A very common one is that the bank you are financing with provides you with bridge financing. So they make the 250k available to you until you have sold the house. For such an amount, the bank will of course want security in the form of a land charge.

What amazes me a bit is the rest.

What do you mean you do everything except certain trades as DIY? Who will do it? Which trades?
Normally no one here can say anything about the costs because your calculation is completely unclear.
350k for 200sqm upscale standard with everything, including ancillary construction costs, ancillary purchase costs, land, equipment like kitchen, furniture, etc., etc., initially sounds completely unrealistic.

Give us some more detailed information.

Hello,

first of all, thank you for your first response.

The matter with my wife is settled so far.

The main work will be done by my father-in-law (master mason, master tiler, architect, civil engineering technician, etc.), who has built several houses in his life and, of course, wants to take on this project with us. Although he is already retired (retired vocational school teacher), he is still very fit. Basically, we only need to have the foundation slab done + doors/windows as well as the garage door; the brickwork inside and outside (clinker) + garage, plastering + tiling, paving/garden/fence will be done by my father-in-law + me (long-term hours account at work), the roof by a very good friend, electricity by my uncle, heating (normal gas heating) by a heating engineer friend.

I would very much like to install hot water and solar on the roof, if the costs do not explode. But that is initially secondary.

One somewhat unpleasant point is that there is no sewage system in this new development area. This means that a 3-chamber septic tank must be installed and connected on the property (already included in the purchase price of the land).

Yes, so go ahead. You then finance, for example, 250k fixed and 250k variable or with a short term for a total volume of 500k. You finish building the house calmly (allow 2 years) and then repay one part of the loan after selling the current house.

Personally, I would only finance 200k variable. That gives a good buffer and can relax you.

By the way, that was no problem at my Sparkasse.

The financing side should not become a big problem.

You will hardly get any help regarding costs and personal contributions. Respect for the project. Your father-in-law seems to have enough experience to be able to estimate that. (Does he really have two master craftsman certificates and is a trained architect?? Very impressive) Good luck with it and I hope your hours account has more than just 100 overtime hours. Also keep in mind what happens if you or your father-in-law are out for a while. When financing, consider the commitment interest if you expect a long construction period.

Hello Sonic88,

the financing should not be a problem. To be able to help further, a personal conversation is certainly useful, depending on where you come from, also possible as a phone call or online conference. I myself have also built new in the neighboring town and rented out the existing house. The financing was done entirely using the new building as the collateral object. The existing one did not have to be additionally burdened, so you can handle the decision completely freely. Now I don't know to what extent data may be shared here, if you know how, you can contact me or provide any contact details, if that's possible.

But at least I was able to pass on my experience.

Regards

Miller1