Real estate financing possible? Hardly any equity, Berlin area

Hello everyone,

we (both 30 years old, without children) are currently looking for a home in the Berlin area. There are some new construction projects in the city; whether an apartment or a single-family house/terraced house is actually indifferent to us. We mainly want our own garden, at least 4 rooms (100 sqm) and a modern interior, preferably in a new building. The properties we have in mind all start at around €500,000 and we wonder how high we can go in our search, or if we are dreaming in vain.

Here are the facts:
Me: €2600 net
Him: €2850 net
Together therefore €5450 net

Current rent including utilities: €1750
Current equity: €35,000
Other fixed costs (electricity, internet, insurance, mobile phone): approx. €500
Food/others/leisure: approx. €400 - €500
Current savings rate: at least €2000 per month and the rest that remains from the month

We drive a very old car, which will have to be replaced at some point. However, I don’t see that as a big issue in the city since the old car is sufficient. We both work in crisis-proof jobs and can expect salary increases in the coming years, as we are both paid according to collective agreements. Also, I have not included special payments such as holiday and Christmas bonuses. Children are planned in at the latest three years from now. With the current financial situation, we manage well and do not have to dip into our savings for vacations or larger purchases.

Since we are relatively at the beginning of our considerations, we wonder how high we could go regarding property prices. The selection is much smaller with €500,000 than with €550,000 or €600,000. What do you say? Should we rather save more and build up the necessary equity, should we already start looking and rather keep an eye out for bargains, or what do you advise us? I also suspect that we would gather €50,000 equity relatively quickly if we strictly save from now on.

Should we rather save more and gather the necessary equity, should we start looking now and keep an eye out for bargains, or what do you advise us? I also suspect that we could relatively quickly save up €50,000 in equity if we start saving strictly from now on.

Your income situation is positive (it will be tighter with a child – you need to consider that in your own life/work planning). A €500,000 loan would probably cost around €1,700 monthly at 3% repayment. Repayment will likely be necessary since this is a full financing. If I were you, I would start looking now – not desperately, but relaxed – and save as much as possible. If something suitable comes up, go for it. Otherwise, wait. Berlin has become a difficult market due to the rent cap. Nobody wants to rent out anymore. Therefore, there is a high demand for ownership, which drives purchase prices even higher. That’s how it goes in Berlin... P.S. There are no more bargains. At most, opportunity properties that you have to dare to approach. Because of location or condition (= if you renovate yourself, you can save) or something similar.

Welcome to the forum.

I'll keep it short:

current warm rent: 1750€
current savings rate: at least 2000€ per month

Theoretically, one could manage a rate of 3000€ per month. That currently allows for an incredible amount. Of course, you should not take out this amount, as there needs to be more left over for parental leave, vacations, or other desires in life.

DINKS couples are always financially very well positioned. Therefore, the interesting question is: what do the numbers look like with children, how much is left over then? I would orient myself more by that than by the values above.

Income is good now, but with child(ren) the belt will be tightened. I would build on this and make a realistic calculation: income - expenses and then set the budget accordingly.

Currently, you would get a lot financed, the question is whether you would be unhappy if the income decreases.

It makes a lot of sense to roughly calculate family planning once - use parental allowance calculators. Calculate part-time factors. For multiple children, consider a period of 5 - 6 years where many things are definitely volatile. Otherwise: save more and keep an eye out for suitable properties. Much can happen in the three years before having children. And as DINKs, you can also start such a project with the bank. Flexible financing would be important for you so that you can lower the monthly burden during the toddler years if things get tight. Regarding the loan amount, I find the multiple of your monthly net household income important. In the past, 110x was considered the maximum loan amount. That means you could go higher, but the regions then become slowly difficult. What is especially important here is your income during the child-rearing years - with two children, definitely 5 years, so 25% of a 20-year fixed interest period.

With the current saving rate, you will have 50,000 equity in 7 months. It is surprising that you currently only have 35,000 equity. That is the saving volume of the last one and a half years.