Purchase of semi-detached house: Handover only in 2016 - Planning, financing options, interest-free period

Hello dear construction and financing experts,

I have been a silent reader for some time and would now like to address you with our own project to present our plans and receive constructive opinions, criticism, or improvement suggestions.

We want to buy the following object:
-semi-detached house from 1998
-305m² plot
-133m² living area (ground floor, upper floor, converted attic)
-fully basement
-incl. garage, garden house, and Swedish stove
-in NRW
-without realtor
-purchase price €345,000
-incl. additional costs (notary/land registry fees, property transfer tax) we come to approx. €375,000

Briefly about our financial situation:
- net income €2,200 + €2,400 = €4,600
- equity €180,000
- current monthly expenses (insurance, groceries, electricity, phone, TV, GEZ, 2 cars, leisure): €1,500 + rent warm: €900
-> total expenses: €2,400

We expect a child soon, so we will calculate with one income and parental allowance for 2 years. After the 2 years I want to work part-time again. However, the financing should be possible with one income.
My husband's salary is collectively agreed, so we can expect €2,800 in two years. Additionally, there is child benefit of €184. The income is therefore approx. €3,000. (Without 13th salary, overtime, etc.)
The rent will cease, but we expect €300 ancillary costs for the house and expenses for the child of €150/month. We want to repay the needed loan with a rate of €800.
-> total expenses: €2,750

It should perhaps still be mentioned that we are basically very cautious and rather conservative in our planning.
The plan is a long fixed interest period with the possibility of special repayments. The required loan is €200,000. We currently have 2 offers:
- fixed interest period 20 years, effective annual interest rate 2.15%, full repayment, special repayment 5%, rate €1,060
- fixed interest period 15 years, effective annual interest rate 2.04%, repayment 3%, special repayment 5%, rate €837 (calculated term 26 years, 5 months)

There is possibly still the option that we borrow money privately, which we can repay flexibly. This will be clarified in the next days. This would reduce the required loan to €150,000. The less money we have to borrow from the bank, the better, right?

Now there is the following "difficulty" with the house purchase. The sellers are currently building a new house themselves and can only move out in about a year. This results in these three financing options for us:
1. We buy the house now, secure the - still relatively low - interest rates and the house owners pay us a monthly rent.
2. We buy the house in a year and conclude the financing now with a 12-month non-utilization period.
3. We buy the house in a year and deal with the financing at the beginning of 2016 with a usual non-utilization period of 2 months.

Alternative 3 is ruled out for us because the risk of interest rate development is too high. So we want to secure the financing in the near future, whether option 1 or 2.

Now the question arises which advantages and disadvantages these alternatives pose both for us and for the seller. We want to think about this thoroughly before discussing it with the seller and entering the final price negotiation.

1. Buy now
Advantage for us:
- secure low interest rates
Advantage for seller:
- money immediately available and can be used for new building project
Disadvantage for us:
- we are immediately owners. We have to pay for repairs until we move in
Disadvantage for seller:
- he has to pay rent even though he currently lives rent-free

2. Purchase in 2016, finance now
Advantage for us:
- secure relatively low interest rates
Advantage for seller:
- he can continue living rent-free
Disadvantage for us:
- a 12-month non-utilization period is not offered by many banks
Disadvantage for seller:
?

Maybe you have ideas/comments on our purchase plan and financing options?
We look forward to feedback!

You are in a fairly comfortable situation with your equity contribution, the calculated installments still offer some room for maneuver in case of doubt (every bank would rather reduce the repayment in case of a borrower's financial difficulties than proceed with enforcement). Otherwise, it hardly matters which option you choose when purchasing. The question will be what the seller accepts as rent. For example, we sold our house almost immediately and were able to work with the proceeds from the sale. The rent was not higher than the previous installment. But then please remember that the owner is also the landlord (= you) and thus not only repairs (which can partly be passed on to the tenant) but also tax issues are involved.

You are calculating with 3000€ monthly - with only 150 € for the child and 400 € tariff increase? That would be too uncertain for me personally because: a) 150 per child is not realistic - we are at about 400 per child b) tariff increases don’t have to come - every employer has the possibility to intervene. I am at a basic level. Companies with collective agreements - one employee gets the group promotion after 18 months, another is denied it because their nose is not pretty enough,... Calculate only with what you really have!

what about parental allowance? normally yes, about 60% of the last salary. although it does not apply for 2 years, it is still a source of income that can and should be included. furthermore, part of the equity could be used as a bridge. your situation is excellent with around 40% equity.

how about option 4: you buy now and the old owner moves out. that would not be a big deal, for example, if the house were "hard to market." that is actually the usual step if he WANTS money NOW. if he needs the money in 1 year, he can also sell it in 1 year. how does the owner imagine this?! because your option 2 means for him that he does not get money now and has to finance it himself temporarily.

option 1 with a tenant is not desirable. on the one hand, you as landlords are liable for all that stuff, if his construction is not finished you may have to file eviction lawsuits in the worst case and the financing might be different because you do not use the property yourself at the time of signing.

if he wants money now he has to leave now. there really is no other solution. one could, for example, reduce the purchase price by 10,000 euros and have the owner contractually agree on a handover date in 2016 (quasi hidden rent). but the bank probably would not like that, since it will not release money before you are registered as a priority in the land register (and the old owner is removed).

1. Buy now
Advantage for us:
- secure low interest rates
Advantage for the seller:
- money immediately available and can be used for a new construction project

Completely usual! Often handled this way.

- We are immediate owners. We have to pay for repairs up to our move-in

Not necessarily. In the notary contract, rent, obligations, and regulations can be set, e.g., that the seller may stay until day xy (handover day) for a cost reimbursement (not rent) of the monthly amount incl. €. The usual amount here is the interest rate you have to pay for your financing. Your repayment is not considered. Utility costs as well as minor repairs continue to be borne by the seller. The condition of the house must of course be maintained and is best documented.

Disadvantage for the seller:
- He has to pay rent, although he currently lives rent-free

I assume that he also has or had a loan to pay off, which he will redeem early after the sale due to the prepayment.

Regards Yvonne

Now there is the following "difficulty" with the house purchase. The sellers are currently building a new house themselves and can only move out in about a year. This results in the following for us:


Now the question arises for us what advantages and disadvantages these alternatives represent both for us and for the seller. We want to think about this thoroughly before discussing it with the seller and entering into the final price negotiation.

1. Buy now
Advantage for us:
- secure low interest rates
Advantage for the seller:
- money immediately available and can be used for new construction project
Disadvantage for us:
- we are immediately owners. We have to cover repairs until we move in
Disadvantage for the seller:
- he has to pay rent, even though he currently lives rent-free

2. Purchase in 2016, financing close now
Advantage for us:
- secure relatively low interest rates
Advantage for the seller:
- he can continue to live rent-free
Disadvantage for us:
- a 12-month interest-free period is not offered by many banks
Disadvantage for the seller:
?

Maybe you have ideas/comments on our purchase plan and financing options?
We look forward to your feedback!

Hello!
We are or were in the same situation. We bought a semi-detached house that we still have not moved into, because the current owners are building.

We arranged both the purchase and the financing in one go. The buyer only receives the money upon handover of the property!

At the same time, the seller reduced the purchase price by the amount corresponding to the rent we pay until the handover of the house.

I would not buy and rent out, because as you already wrote, you are then responsible for the property.

Buying and handing over later has the advantage that the homeowner is obliged to hand over the house in the condition in which it was sold and to remedy defects that arise in the meantime themselves.

Regarding your second financing thought:
closing financing now and buying later, for me the questions are
1. do banks even do that? Financing without a notarized purchase contract (draft)
2. What if the owner sells to someone else in the meantime? Who bears the fees / prepayment penalties if the financing is reversed?