Purchase financing: how much equity (with the low interest rates)?

Hello everyone,

we are about to buy a house and I need some input regarding the financing. My thought process is certainly not very conservative...

The house costs around 260k + 17k ancillary costs + about 50-70k to invest (kitchen, garage, lots of "small stuff")
Equity capital about 300k (90% in stocks).

Looking at it quite rationally, it makes the most sense to pay the ancillary costs and finance 100% with 2% repayment over 10 years and invest the rest in the capital market. (Bank interest about 1.3% vs. very conservatively 3% dividend, for example).

Now I am partly also a bit scared and if the markets crash in 10 years and interest rates rise (and maybe hell freezes over), that would of course be bad...

We currently have only one salary, i.e. about 4000 net (including 2 x child benefit) for 4 people. So the repayment will not be able to be very high anyway.

However, I am now leaning towards the following:

10% equity + ancillary costs + the 50-60k investment in the house
3% repayment (1.13%) about 800/month.
15 years fixed interest period

Then after 15 years you still have 45% residual debt, so not much more can happen anymore (even if hell freezes over).

As written above, this is not really conservative anyway, so please no comments like: I would put everything in and repay everything as quickly as possible. That would be economically nonsense.

Thanks
Regards

Hello, welcome to the forum.

Personally, I would put in about 20% equity plus additional costs, kitchen, etc. It depends a bit on where these magical interest jumps are with your bank. That way I could sleep well myself. Repayment also rather at 3% than 2%.

I don't know anything about the house, but 260k seems very cheap. Maybe you still have to consider bigger repairs in the next few years?

Saving money is great, but what are you saving for if you don't want to spend it on your own house?

Anyway, your situation seems very comfortable. Just do what you and your family feel good with.

Hello,

Thank you for the response.

The house was built in 2000, we were quite lucky with that.

I just want to make my money work so that I can possibly retire earlier and create more time for life, and not sink all the cash into a house. But that is basically a fundamental question.

have you "earned" the 300k on the market?

When you have a portfolio like that, it eventually becomes work and addiction. I would pay cash for the house and start "small" in the market. There is no best condition

Did you "earn" the 300k on the market?

When you have a portfolio like that, it eventually becomes work and an addiction. I would pay cash for the house and start "small" on the market. There's no better prerequisite.

Inherited about 65k, saved and invested the rest. I invest more than I trade, so no stress/addiction.

Buying in cash, when you get 1 to 1.5% interest on money, would be an economic disaster. As I said, you can for example only buy McD. shares, which hardly fluctuate and pay about 3% dividend.

But regardless of which strategy you choose, the decision is probably quite nerve-wracking.

The salary looks like you could easily pay the repayment and interest.

As a stock-interested person, you probably know that stocks (broadly diversified, e.g. in an ETF) in the last 150(?) years, even if bought at the worst possible time, have never posted losses for longer than 13(?) years.

Thus, the worst case would be:
Both unemployed, and at the same time a stock crash, and selling the stocks at a bad time to cover the loan.

Personally, I would only contribute the minimum amount of equity that gets acceptable interest rates (10% + ancillary costs?) and form another 10% as a cash reserve to be able to cover the installments in the worst-case scenario without having to sell the stocks at a bad time.