Planned construction project 2016/2017

Hello everyone,

I have already been reading diligently in the forum and have received many tips and advice that helpfully support my current rough planning. Thank you very much for that!

About the project: My partner and I are planning our house construction for 2016/2017 and are currently gathering plenty of information & ideas around the topic of house building. We already have a rough idea of how our dream house should be equipped and how much space we need. At the moment, we are dealing with the subject of financing to roughly calculate our available budget. Here at the end a few questions, beforehand the conditions regarding our project:

1. Personal Information:

[*
Partner, 32, works full-time (employee position, permanent contract)
[*]Me, 28, work full-time (employee position, permanent contract)
[*]We definitely plan to have 2 children within the next 3-4 years



2. Income:


[*]Calculation 1: Both full-time: 4850.00 EUR net
[*]Calculation 2: Partner on parental leave + child benefit: 4484.00 EUR net
[*]Equity:
[LIST]
[*]80,000.00 EUR cash assets
[*]Plot of land 1074 m² available (value approx. 200,000.00 EUR; rural area)

3. Expenses (total rounded up for everything):

[*]Electricity 80.00 €
[*]Housing ancillary costs 350.00 €
[*]Telephone/Internet 40.00 €
[*]Mobile phone charges 20.00 €
[*]Broadcasting fees 20.00 €
[*]Insurances 30.00 €
[*]Car insurance 80.00 €
[*]Car tax 40.00 €
[*]Car financing 200.00 €
[*]Car repairs 100.00 €
[*]Club membership/Fitness 45.00 €
[*]Public transport 60.00 €
[*]Fuel costs 250.00 €
[*]Groceries 400.00 €
[*]Clothing 200.00 €
[*]Vacation/Leisure 300.00 €
[*]Gifts 100.00 €
[*]Repairs/Miscellaneous 150.00 €

Total expenses per month 2,465.00 €

Available income after monthly total expenses:

[*]Calculation 1: Both full-time: 2385.00 €
[*]Calculation 2: Partner on parental leave; me full-time; child benefit: 2019.00 €

To still have enough buffer, we are planning with a max. loan installment of 1050.00 – 1200.00 EUR. We then have about 1000.00 EUR available as a buffer in the optimal case (among other things also for special repayments).

4. Construction project:

[*]Plot owned and fully developed, but with necessary demolition work of an old detached house
[*]Demolition work 20,000.00 EUR
[*]Construction costs 310,000.00 EUR (approx. 174 m² living space; basement, ground floor, upper floor, garage)
-our planned/available budget-
(Planned own work: painting, wallpapering, laying tiles, electrical installation)

[*]Additional construction costs 40,000.00 EUR
[*]Buffer 30,000.00 EUR

Total costs: approx. 400,000.00 EUR

Financing requirement: 400,000.00 EUR – equity of 80,000.00 EUR = 320,000.00 EUR

Now our questions to you:

[*]Is this calculation roughly correct? Are costs set too low or have we forgotten important points?
[*]Is financing at this amount manageable or should we rather save more equity? (realistic per year 15,000.00 – 20,000.00 EUR).
(Loan rate roughly calculated with min. 2.00% repayment, fixed interest 20 years, interest rate approx. 2.20%)

Many thanks for the help!

In principle, it looks roughly solid (I haven’t looked at every single point) in terms of financing. What you should include in your plans or consider:

What does it look like after a first parental leave or a second parental leave? Will your partner still be able to work full time or not? How will the income look then? Keep in mind that monthly costs will increase. Firstly, due to the children, childcare, and insurances will definitely be significantly more expensive with the house, I also consider food costs (at least with children) to be significantly underestimated, also think about the reserves for the house. Construction costs may be accurate (do you already have offers, or is that roughly estimated?), but keep in mind that landscaping is not yet included, which can quickly become expensive. Are the earthworks already factored in?

That’s my first brief statement.

Hello,

thank you very much for the quick response

My partner will definitely return to work after parental leave - probably not full-time right away but at least part-time, i.e. the second income will not completely disappear due to family planning. My salary should also increase over the next few years, although I will initially disregard that. For childcare, there are also grandparents nearby.

After the planned expenses and the loan rate, we still have approximately EUR 1,000.00 available. This should possibly cover higher costs and build reserves (EUR 200.00 - 300.00/month).

I will check again regarding the insurances - thank you very much for the hint. Which insurances are recommended for the home? Besides liability and household contents insurance, I see the residential building insurance here.

I have included the earthworks/excavation in the costs for the house demolition. The old house has a basement. Are the demolition costs consequently set too low?

We have not obtained any offers yet. Before the first meeting, we would first like to roughly define the financial means.

Don't forget that the bank already considers the property as equity. Accordingly, you are in a very good position. With these conditions, I wouldn't worry much. With this, you should be dream clients at almost every bank, since you have a loan-to-value ratio of under 60%. I wouldn't worry about it. Either you simply make many special repayments at the beginning with a low installment. Or you immediately increase the repayment to 3 percent. Your installment doesn't even make up 25 percent of your income. There are significantly different cases.

Plot 1074 m² available (value approx. 200,000.00 EUR; rural area)

200,000 for a rural area. Is that the market value of the plot or where does the value come from?

asks Yvonne

And as a little tip: Have a child first, then see what’s left afterwards – that’s missing from your calculation (it will of course still work, but the buffer melts).

And don’t just assume that your partner will go back to full-time work – women can change quite quickly in that regard – and that’s a good thing. Especially after the second child...

I also don’t understand the calculation with the salary: Why is there only 380 euros less during parental leave? There’s only about 65 percent left – a maximum of 1800 euros. Or is she a low earner with just under 1000 net? Then it would fit...