Save more or buy???

Hello everyone,

I plan to move in about two years because the apartment, 3 rooms, is becoming too small.

We are in our mid-30s, have two children aged 4 and 8 (no more planned).

Since my wife recently started working again (part-time), we haven’t been able to save much.

During the eight years I was the sole earner, I also had to repay Bafög.

Income (only 12 months) both including child benefit is about 4,200 €.

Christmas bonus or holiday pay not included.

In September 2014 we bought or financed a 1-room apartment.

By the end of 2017 it will be completely paid off. (Current payments 600 € + rental income)

From 01.2018 rental income will be approximately 3,500 € annually (before tax).

Market value about 50,000 €.

There are two other building savings contracts ready for allocation 1st quarter / 2021 (each 162 €).

They are Riester subsidized. By the end of 2020 about 40,000 € will have been paid in.

As long as the children receive child benefit, there will also be a bonus.

If we buy in 2017 and use both in 10 years later in 2027 to pay off the loan. (By then about 74,000 € paid in.)

Currently, with 4,200 € we can

- pay off the apartment with 600 €

- save into both building savings contracts with 162 € each

- cold rent 350 € (400 € service charges)

- 1,000 € in a daily allowance account

- kindergarten and school 300 €

At the end of 2017, we will have equity of only 20,000 €.

If it is a house with a garden, we can sell our allotment garden (5,000 €).

We go on vacation with the children twice a year. (financed by the side job).

With my wife we go away at least twice a year for the weekend (Thu to Mon). (financed through business).

So none of the 4,200 € needs to be used for vacation.

In mid-2018 our daughter will finish elementary school, our son kindergarten.

It would be a perfect time to move. Or should we continue living in the apartment and save?

Single-family houses start at 400,000 €. Terraced houses are not an option. Currently a 5-room apartment 150 m² is offered for 330,000 €. Or we move 20 km further away. That would be a bit cheaper.

Johann

Off the top of my head, I would say to purchase the apartment for 330k.

The purchase in 2014 was a mistake. Otherwise, quite clear: save up equity. It should be 20% after all.. Especially because 4200 EUR for 4 people is not a large income.

The purchase in 2014 was a mistake. Otherwise, very clear: save up equity. It should be 20% after all.. Especially because 4200 EUR for 4 people is not a large income.

why was it a mistake?

why was it a mistake?

Because now it requires equity and not a credit-financed apartment. Why was it even bought? Probably you couldn’t generate any returns with it even in 2014. Tenant-rented & credit-financed owner-occupied apartments are currently pretty much the dumbest thing you can do :)

If the original poster had invested the money in a stock market savings plan since 2014... there would probably be significantly more available now and directly accessible.

Hello,

I don't need the money now, but only in mid-2018. Until then, the apartment is paid.

johann