Planned own home, is our dream achievable?

Hello,

My future wife (26) and I (28) would like to build/buy in about 5-7 years. Total costs including land max. €300,000.

I am still financing my car until May 2013 at €300/month and can save €200/month until then. From May 2013, a total saving amount of €500 per month would be possible on my part.

I currently earn €2,000 net (which will increase each year over the next five years to about €2,600), so the savings rate might also be increased. My girlfriend earns €1,300. She can save about €100-150/month. Until now, she had a home savings contract, which is now expiring and will mostly be used for the wedding. The €100-150 would now have to/could be newly invested.

I currently pay €200/month (including employer advance) into a home savings contract (Debeka). As mentioned, from May 2013 a larger saving rate (€500) would be possible from my side.

Our current monthly rent burden is €530 cold, €680 warm + €40 garage.

Regarding retirement provision and insurance:
We both have a Riester pension and I additionally have an occupational pension scheme and disability insurance.

Our questions are:
1.) Would owning a home be realistic with our financial means? If yes, when?
2.) How should one best save the money until then?
3.a) ...the €100-150 from my girlfriend?
3.b) ...my €300 from May 2013?
4.) What tips & advice can you give us until then?

Thank you in advance!
Best regards
Gatho

Well, just calculate it:

Equity is always good. The more, the better – so: save, save, save.

Regardless of the amount of equity:
(This is just one argument for the bank of your choice to even get a loan – that and your income/job.)

Currently, you can calculate about €500 per €100,000 loan per month (30 years term) – no one can say how interest rates will look in 5 years.

If your plan with total costs of €300,000 works out and you save (no matter how long, what matters is how much), the following applies:

save: €500
from the bank: €299,500
Chance for loan: none

save: €50,000
from the bank: €250,000
Chance for loan: not impossible

save: €150,000
from the bank: €150,000
Chance for loan: pick a bank

In addition, there are monthly additional costs (when you live in it): e.g.: temptations, water/sewage, electricity, trash, property tax, chimney sweep...
You still have to live. If the calculation of monthly income minus monthly expenses ends up around zero – stay away.

Don't calculate yourself "rich," "in 5 years I'll have €600 net more per month" is not a good approach (like: today I’m still €100 in the negative per month, but in 10 years I’ll earn more, then everything will be fine. Better to build in 10 years than to be without a house again in 11.)

When building a house + land, the price per sqm matters.

Land: xxx sqm * sqm price + property transfer tax + notary + land registry + development / house connections
House: depending on size and equipment + outdoor facilities
There are certainly costs that you didn’t think of at first.
Please consider double burden: rent + bank repayment during the construction period.

Following proposal: No one can predict the interest rates and construction costs in 5-7 years. Both will probably be higher than at present. Following option: The car with approximately 6,300.- Euro remaining loan will be paid off. This makes available: 570.- Euro current cold rent including garage 500.- Euro savings amount from you 150.- Euro savings amount from your future wife Resulting in 1,220.- Euro monthly amount for financing. This results in a possible loan amount of 292,000.- Euro at 4% interest and 1% repayment, with a 10-year fixed interest period. The two Riester contracts can be immediately converted into Wohnriester contracts. This way, the previous subsidy is not lost and the saved amount counts as equity. Instead of a new build, I would rather look for a newer already existing property.