Project house construction. What can I finance?

Hello everyone,

Since my wife and I are expecting our first child, we want to expand as soon as possible. The first step in this direction has already been taken, as we have acquired an admittedly very large (1300sqm) plot of land. The purchase price of the land is €108,000, which we initially financed fully with a variable rate while the house plans are underway.

We are
Me, 38 years old, career civil servant, monthly net income in tax class 3: €3800 plus soon €200 child benefit
My wife, 29 years old, currently still a psychology student, income: €0, studies expected to be finished in about 3 years. In the medium term, my wife will also improve our finances a bit. Nobody knows to what extent. The child is due in August and a second one is also planned. Additionally, we have a dog and another one is also planned here :)

About our finances:
We have €30,000 in cash as equity. Furthermore, we currently live in a condominium with a market value of €250,000. There is an outstanding loan of just under €90,000. The financing expires in 2024. I would of course like to keep and rent out the apartment, but then equity is tight. A second-rank mortgage would also be possible. Ultimately, we would sell it if that makes the most financial sense.

Since I am not very skilled in craftsmanship myself and work full-time, I will only be able to contribute limited personal effort in building the house. I could fully delegate the electrical work to a family member. My current thoughts revolve around what we can actually afford. The plot we bought could be divided, so we could easily separate off 500sqm (it should not be more, as we want to keep 800sqm as our own) and sell it to improve our finances. But that should only be the "ultima ratio". We want to keep the 1300sqm if at all possible.

I have already been to a credit broker. I currently have the following offers for a total volume of approximately €500,000:

Scenario 1: Selling the apartment

10 years fixed interest
Annuity loan, 0.80% effective, loan amount €227,000, 10 years fixed interest, installment: €785
Bridge financing for apartment, effective 4.44%, loan amount €150,000, installment: €530
KfW loan, effective 1.13%, loan amount €120,000, 10 years fixed interest, installment: €400 = total installment €1185
Remaining debt after 10 years and repayment of bridge financing: €212,000

Scenario 2: Keeping the apartment

10 years fixed interest
Annuity loan, 0.88% effective, loan amount €465,000, 10 years fixed interest, installment: €1300
Remaining debt after 10 years: around €340,000
KfW is not included here yet. But considering the remaining debt is above €300,000, that will not change much.

20 years fixed interest
Annuity loan, 1.47% effective, loan amount €465,000, 20 years fixed interest, installment: €1400
Remaining debt after 20 years: around €230,000

If I sell the apartment, I would not opt for more than 10 years fixed interest, as the remaining debt after 10 years is in an acceptable range; therefore, there is only an offer for 20 years fixed interest for the "keeping the apartment" scenario.

How do you assess my situation given the extreme prices on the market? It would probably have to be €500,000, I think. Then I would have about €400,000 after deducting the land available for the house, additional costs, and outdoor facilities. Feasible? Or should I say goodbye to the large plot of land? I currently assess the situation as hardly manageable to keep the apartment. What do you think? In a few years, our monthly income will likely increase as my wife can start working. Or is the financing even fairly "solid" (at least in the case of selling the apartment) and I might even have some financial leeway?

Am I overlooking something? What are your thoughts on this?

Thank you all in advance!

Hello,

yes, you will very likely not be able to avoid selling the apartment.
It will be a long time before your wife earns, and the available equity doesn’t help you with these amounts either. With more liquid equity, the interest rate would also be a bit better.
What would be a realistic cold rent for the apartment in your region? And can you also find enough solvent tenants who will stay in the apartment long enough? A land price of < 100 euros/sqm does not sound like a booming region to me.
Over time, maintenance measures will also come, so enough reserves must be available.

So for me, there are more reasons against selling the apartment. However, it would then of course need to be clarified where you want to live until the house is ready to move into. If you are lucky, the buyer will purchase as an investment and already have suitable tenants with you.

Hello,

yes, you will most likely not be able to avoid selling the apartment.
It will be a long time until your wife earns, and the existing equity does not help you with these amounts either. With more liquid equity, the interest rate would also be somewhat better.
What would be a realistic cold rent for the apartment in your region? And can you find enough solvent tenants who stay in the apartment long enough?
Over time, maintenance measures will also come, so there must be enough reserves available.

So for me, there are more reasons against selling the apartment. However, it would of course have to be clarified where you want to live in the meantime until the house is ready to move in. If you are lucky, the buyer will buy as a capital investment and already have the right tenants with you.

oh yes, I forgot. Solvent tenants are no problem here. There is a severe housing shortage. 800€ cold rent is absolutely realistic!

Which area are we talking about?

400k for the house + additional costs + outdoor area + kitchen? That wouldn't be enough for much of a house here.

So I would definitely sell the apartment.
However, I would keep the land. The 40k are negligible compared to the apartment.
The only alternative for me would be to wait with the house construction until your wife is also earning money.

Which area are we talking about? 400k for house + additional costs + outdoor facilities + kitchen? That wouldn’t be enough for much of a house here. So I would definitely sell the apartment. But I would keep the land. The 40k are negligible compared to the apartment. The only alternative for me would be to wait with building the house until your wife also earns money.

We are talking about the Braunschweig/Wolfsburg region. The apartment is located in Wolfsburg. The house is being built 30km outside "in the countryside". If I wait to build the house until my wife also earns money it will be 2024. However, I live now, not in 3 years...

Currently, my thoughts revolve around what we can actually afford

This is usually the very first step before even a single line is drawn on the floor plan and a single cent is spent/has been spent. Why buy a (much too large) plot of land for over €100k when half of that would have easily sufficed. From my point of view, your wife will not be able to contribute (significantly) to the financing for the next 5 (to 8) years. In addition, the child benefit is spent two or three times over. (Until the basic equipment is in place... and then the ongoing costs come...). And with about €500,000 financing needed, a rate of €1500-2000 should be aimed for. What is the current rate for the apartment? I would first record the current situation and list all income/expenses (household book), then you will immediately see what is possible with/without selling the apartment. You can use the above-mentioned interest rates as a guideline. Tip from a builder to a future builder: Plan and calculate the entire "homeownership" project through, from the house, outdoor facilities, carport... to kitchen, furniture, lamps, curtains...