Realistic purchase of land and new construction of a single-family house & how to finance it?

Hello everyone,

we (both 36, 3 children 1/3/5) are planning to build a single-family house in Upper Bavaria (why is it just so damn expensive here...).
The plot with about 600 sqm would cost 235,000 + 5% notary and tax (without realtor) + about 20K incidental costs (connections + connection to biothermal/district heating) = 267,000 EUR
The house should have a full basement, with 5 rooms and about 170 sqm living space, a double garage would also be nice.
For this I am planning about 400,000 EUR (south of Munich). Is that realistic?

Together everything costs about 667,000 EUR.
Only 145,000 EUR equity is available (just bought a new family car for 35K before the option was on the table...) + 25,000 EUR in the building savings contract (Riester, not yet eligible for allocation). Possibly we would get another 50,000 financed from the family.
So let's just say loan amount = 500,000 EUR

My wife is currently not working but could work part-time again after about 3 years when the children are either in kindergarten or school and would then bring home about 1,300 net.
I work full-time and currently earn 4,300 net / month + child benefit 558.
So we currently have 4,858 available.
Minus savings rate for building savings contract, rent (cold 1200) leaves a savings rate of about 1,200 (if I calculate all our costs over the year).
Is it realistic that I can carry the loan amount alone and still live well?
How do you assess this, what are your experiences / tips / opinions?

Regarding financing:
would you include KfW and also the building savings contract right away?
Problem: the building savings contract is actually not so cheap because of about 3% effective annual interest rate after allocation and about 2.6% until allocation.
If I borrow 500K at the Commerzbank (for 15 years), it costs about 1,900 per month (at about 2.5%) interest rate. But I would have to continue servicing the building savings contract.
Can you take out a loan at Commerzbank or another bank and still use the building savings contract at Schwäbisch Hall (because of the land charge entry)?
Do I have to know exactly now what is coming, since house building is earliest in 2015? That is, can you increase the loan? So that the loan for the house building does not become secondary and then only available at worse conditions...

Questions upon questions...
I would be very happy about helpful comments!

Regards
Tom

I can't say anything about the costs.

A loan of 500 T€ is definitely a significant amount. According to a rule of thumb, a rate of 2,500 € should be calculated here. But that is just a rule of thumb. With your monthly income, it could already be tight. Also consider possible higher additional costs and building reserves.

How high is the savings sum of the building savings contract and when is it ready for allocation? What kind of interest rate is that with the 2.6%?

KfW can be useful, but it doesn't have to be. One idea would be, for example, to take out the two KfW loans as bullet loans and then repay them with the building savings contract. Whether this is worthwhile would have to be recalculated. But it would give you some leeway with the monthly rate.

Whether a loan can be increased should be clarified before signing. However, if at all, there probably isn't much room for maneuver.

Is Commerzbank your house bank? If not, you might want to get advice from them. Or also independent brokers.

I estimate that you will definitely be able to finance this; the question is how long the term will be.

€500,000 loan (if it remains at "only" €400,000 for the house) means a minimum of €2,000 per month to the bank. I can hardly imagine that a bank would agree to that.

In your situation, you should speak with the bank / financial advisor.

Thanks already for the "sobering" answers. I know, a 500,000 loan is quite substantial, but I had basically assumed so far that we are reasonably well positioned (in terms of monthly income). Yes, the proximity to Munich makes the whole thing very expensive... Equity of 145K is of course not much, but there is now also a large new car, so in the next 10 years we should only face maintenance/wear and tear (well, who knows). The second car will have to be replaced at some point, but I have factored that in. As I said: ~4,860 net per month (without my wife) and with around 2,900 expenses very generously calculated (including all insurances, taxes, vacation, entertainment, eating out, additional costs, etc... really enough buffer built in). And it’s not like my wife will never work again. Maybe you have a better picture or can help me better if you have more info (I have no problem with that). I am an engineer (10 years in the company) with 82K fixed (of course gross) and my wife is a doctor. She could start part-time again anytime (full-time about 60K). I thought we could then service a loan of about 500,000. Yes, Commerzbank is the house bank. We haven’t had a detailed consultation yet, as the project is in the absolute initial stage. I was thinking of a term of at least 15 years if not partially longer – it should be a “healthy mix.” The question is of course how high the house construction will finally be. Is 400,000 for about 170 sqm living space with basement and garage too little? Or could it be cheaper? We always wanted to build solidly, but if it were 100,000 cheaper, we could also come to terms with a prefabricated house (the quality has improved significantly). Or where could one save on construction? First leave out the garage, only partially basement? With the district heating it should also be a bit cheaper, right? Regarding the home savings contract: it is a Riester contract with Schwäbisch-Hall over 2 x 60,000 EUR. Currently 25K saved up, ready for allocation in about 7 years. As I understood it, I could already use it now, would have to continue paying savings rates, and get an interest rate of about 2.6% for the loan. After allocation, the whole thing would be changed to 3.0% effective interest rate, with repayment (it’s a higher burden since repayment is faster than with a bank loan). No idea: but I wonder how all the others around us do it… does everyone have 300K equity and earn six figures? The plot here simply swallows 235,000 without additional costs... :-( Maybe I’m worrying too much... surely 70% of the others worry less... I just don’t want to realize in 10 years that it was all too much...

Living space with basement and garage too little? Or would it also be possible cheaper? We always wanted to build solidly, but if it were 100,000 cheaper, we could also come to terms with a prefabricated house (the quality has improved significantly).

Hello Scome,

You should quickly abandon the idea that a prefabricated house is cheaper than a solidly built house. Nowadays, it is rather the other way around – a high-quality prefabricated house is usually more expensive than a solidly built one.

Our individually planned timber-frame prefabricated house (1.5 stories, third gable, approx. 190 sqm living space) costs, without land and incidental building costs, almost exactly EUR 400,000...

Of course, you can also get a "cheaper" prefabricated house, but it's just like with cars – whether prefabricated or solid house, there are Dacias and Porsches...

Regarding financing:

Think again about the Riester thing; even I, as a banker, find it somewhat dubious, since to this day no one has been able to explain to me exactly the future tax implications.

Best regards,

Dirk

Hello,

Equity of 145K is of course not much,

Ahem ... I wouldn’t really want to call that "little" ...

Yes, Commerzbank is the house bank. We haven’t had detailed advice yet, since the project is in the absolute early stage.

In my humble opinion, house banks are only suitable for financing a construction project if there is a profitable self-employment. I keep experiencing that house banks adopt the conditions of our independent financing broker if the bank fears losing a solvent self-employed merchant.

I recommend you look for an "independent financing broker" in Munich. Stay away from AVM and whoever the former pyramid scheme operators are called nowadays; the same applies for bank-tied financing brokers; you should be able to recognize this by their portfolio. Also, get an offer from an insurance company; nowadays always worth asking. And – because it is currently being discussed elsewhere here on HBF – get your own Schufa self-disclosure beforehand. This minimizes the risk of incorrect entries there; it’s enough if the institution to which you finally entrust your confidence checks this own disclosure!

When you have 3 offers, confront the competitors with the golden calf and see what happens ;)

we (both 36, 3 children 1/3/5) plan to build a single-family house in Upper Bavaria (why is it just so damn expensive here...) The plot of approx. 600 sqm would cost 235,000 + 5% notary and tax (without broker) + approx. 20K ancillary costs (connections + connection to biothermal/district heating) = 267,000 EUR. The house should be fully basemented, with 5 rooms and approx. 170 sqm living space, a double garage would also be nice. I plan about 400,000 EUR for this (south of Munich). Is that realistic? The question of course is how high the final cost of the house will be. Are 400,000 for approx. 170 sqm living space with basement and garage too little?

Bavaria also has the most expensive rents ... it’s all a matter of supply and demand and “Franz-Josef land” still takes the cake here; I think it will hardly change in the medium to long term (in my opinion that’s also intended; Bavaria doesn’t want “naive” residents).

I assume it is supposed to be a classic single-family house with a pitched roof? Then the calculation for your construction project – with medium equipment – would probably look as follows:

Plot: TEUR 235
Single-family house, Kfw 70 – plaster house including floor slab: approx. TEUR 306 (without heat generator, since district heating)
Usable basement: approx. TEUR 45
Prefabricated garage 6 x 6: TEUR 12
Additional construction costs: TEUR 35-40
Painting work in EL: TEUR 15
Floor coverings in EL: TEUR 15
Outdoor facilities in EL: TEUR 15
Reserve for extras: TEUR 15

All in estimated: TEUR 698

Or could it be cheaper? Always wanted to build solid, but if it were 100,000 cheaper, we could also warm up to a prefabricated house (the quality has improved significantly).

A prefabricated house built by a reputable provider is not cheaper; in quite a few cases even significantly more expensive. Moreover, not every prefab house provider is rated positively for financing!

Or where could one save when building? Leave out the garage first, only partial basement? With district heating, it should also be a bit cheaper, right?

Garage, I would always take a prefabricated garage, can be applied for and installed at any time later; about TEUR 12 could be saved here if initially 2 parking spaces serve the purpose. A partial basement is – due to the necessary earth and connection works – almost as expensive as a full basement; savings at most in the range of TEUR 5-8. Whether district heating is cheaper in the long term depends on consumption costs. I, for example, don’t care for mandatory obligations; sooner or later they catch up with me.

Just don’t want to realize in 10 years that everything was too much...

That can be largely minimized by careful and "not" rushed planning – starting with the financing. And if in the end the conclusion is that it just doesn’t work, the effort was worth it.

But I don’t see a big problem either; you have the best conditions for your wish to be realized economically. The answers here on HBF are all well-meaning advice from users, based on their own experience or job. You must not forget that neither house construction nor financing can be compared 1:1. So take the advice and conduct the necessary financing talks.

Oh yes – you must not forget later during construction that construction is measured not in "µ", but in cm (tolerances allowed). Then it will also work out with the craftsmen ;):)

Rhenish greetings