Seeking advice: Your own four walls - offer from a financial advisor

Hello dear forum community,

//a little more text, hopefully sufficient to clarify all further questions in advance!

The goal we have set ourselves is to get into our own home. We would like to achieve this goal in the next 5-8 years.
A short introduction about us: We currently live in Dresden (paying around €720 rent (3 rooms - 70 sqm)) and would like to build our own four walls in Dresden or the nearby surrounding area.
I work permanently/unlimited in the public sector and earn €2000 net.
My partner also works permanently/unlimited in the public sector with €1550 net.
We have one child (under 1 year).
Currently, we have equity of around €10-15K (bank money); a large part of our equity went towards the new car last year – almost €20K.
Additionally, we have capital-forming disability insurances [BU's] with a final value (paid out at age 65) of approx. €150,000.

We have contacted a financial advisor to build up enough equity over the next 5-8 years to tackle the house project with sufficient security.
For this, we have initially set a rough estimate for our calculation of €350,000 for the land/house to see how much equity would be roughly needed.

The following was offered to us by the financial advisor:

2 different investment funds (Kapital Plus and DWS Top Dividende)
We should pay €100 each per month for these and would have an expected capital of €11.7K and €12.2K Equity = €23.9K in 8 years.
2 building society contracts each €50,000
Monthly saving rate will probably be between €200-250 per building society (offers are still being obtained), and after 8 years that would then be about €50K equity + €50K low-interest loan
Equity = €50.0K
The 3rd savings pillar should be called Riester ... and I’m not yet 100% confident in it.
I would pay €103 and my partner (with child) €55 per month. This Riester pension will/would then be changed to Wohnriester, so I would have the possibility to have about €10,000 equity per person from the saved pot. Don’t ask me for direct details, as I still have to check it...

Thus, we would have an estimated equity in 8 years:
Investment: €23,900
Building Society 1: €25,000
Building Society 2: €25,000
Wohnriester: €20,000

Hard cash - equity total: €93,000

Sounds tempting at first, the monthly additional burden per person would be about €400 and basically bearable, possibly the investment part will be adjusted.
Where is the catch, what have you had good or negative experiences with?
Have we overlooked something or were we not made aware of a catch?
How would you save?
Is the roughly mentioned above realistic or are we stumbling into a trap?

We will certainly contact another financial advisor and get a second offer. But I think they all work according to the same formula.
Therefore the many questions to you seasoned members ;-)

Thanks for reading and possibly for responding...

Regards
Enrico

Hello

sporty sporty. Especially since you have concerns about a safe product like [Riester]. You do realize that funds are subject to fluctuations, right? That means for you that from the 14.4k you save in 8 years, it can just as well become 7k.

Hello HilfeHilfe,

thank you for your response/attention.
According to the financial advisor, these would be safe funds - are there even safe funds? So would they be the main risk?!
Yes Riester stomach ache - if you read the opinions about it on the internet (some swear by it and others would advise against it at all costs)

The financial project is definitely set up athletically, but with possible room for downward movement...!

Have a nice weekend everyone!

Hello Enrico,

I agree with HilfeHilfe.
You should keep in mind the risk of the fund’s price fluctuations.
What’s stopping you from paying 700 euros monthly into a correspondingly high home savings contract [Bausparvertrag]?
You could also pause it anytime if something unexpected happens.
At the same time, because of the good subsidies with a Riester pension, I would also do that.
Whether you use the Riester pension as a [Wohnriester] in 8 years or simply use it another 10 years later to repay any remaining debt doesn’t matter.
Or alternatively, you have something nice for later in retirement.

But I can already imagine that if you stick with the home savings contract, you could handle about half of the financing through a home savings bank and the other half through a bank, perhaps with government aid ([KfW] etc...).
Accordingly, you would also get great conditions.
And by having a higher home savings contract, you partly secure yourself favorable interest rates for your later construction financing because I can imagine that interest rates in 8 years will be significantly higher than today.

Hope I could help a bit.

Best regards
André

If the financial advisor talks about safe funds, I would change him. ;)

Yes, in the current market, funds can also go badly wrong. One should at least not let it run blindly for 8 years. Taking a look at it every few months and actively managed money in funds is important and at least reduces the risk further.

However, this procedure does not really make a fund investment safe. It is and remains risky.