Sell a new building and buy an existing property - pitfalls?

Hello everyone,

we have been silent readers for a long time and now we also have a concern:

Briefly about the current situation:
We (30F + 30M + child 1 year + another child planned) moved into our newly built house in 2021. For various reasons, we are considering relocating again. We are aware that this is not financially sensible. Nevertheless, we wonder how to approach and implement this and what financial framework we should set for ourselves.

Currently, we live off one salary (€2,550 net) + child benefit (€250) + rental income (€300, all costs including reserves and taxes are already included).
Thus, we have €3,100 available per month and a loan installment of €750. We manage with this and lack nothing. Of course, we currently have no large savings rate. However, reserves are available in sufficient amounts. For the future, we are currently planning child no. 2, so a second salary is not to be expected for the time being.

Our current loans amount to about €225,000. For the newly built house, we estimate a sales price of about €550,000 (estimated by us). There would be a prepayment penalty of €25,000 for the loan.

That’s the current status. How do we proceed now?

Talk to the bank first? How would that work?

The current interest rate (about 1%) will presumably not be transferable to the new property. Would we still get a mortgage with the current conditions? With the same installment of €750 and 4% interest rate, that would be about €170,000. Is that realistic?

How does the purchase of a new house work if you still have a loan on the existing one? What would be a sensible timeline?

As you can see, we are currently somewhat clueless and grateful for any assistance.
If essential information is missing, please let us know briefly.

Best regards

With a constant rate of €750 and an interest rate of 4%, that would be approximately €170,000. Is that realistic?

4% interest on €170,000 is over €550 interest per month.
That leaves nothing from the €750 to repay the principal.

In addition, there is the double burden with building a house, etc.

I see no chance to get out of that with your financing concept.

The question is, what do you get for 170k in the region you want? Are you sure about the prepayment penalty? If the old loan is around 1%, not much will be left from the penalty except a few fees, since the interest rates are currently much higher.

In addition, there is the double burden with the house construction, etc.

The direction was new build -> existing property, so that should rather not be a problem, as long as not too much renovation work is needed.

Are you sure that prepayment penalties still apply? With the significantly increased interest rates, they are mostly likely close to zero, since the bank can now get more for its money.

I see the critical point in the relatively low income. With the higher interest rates, this leaves little room to repay even a small loan. On the other hand, it is probably difficult to find something under €1000 rent for 4 people.
For you, the clear prerequisite for further financing is that you are free of the old financing. Therefore, I would carry out both transactions almost simultaneously, with the notary appointment for the sale a few days earlier.

Thank you very much for the initial feedback.

In my opinion, double burdens should not exist, or would be bearable for a certain period of time. We are actually considering moving from a new build to an existing property.

Regarding the prepayment penalty, a "smart" online calculator gave me this result. It sounds plausible that this could be significantly lower in some cases. I would actually have to discuss this directly with the bank.

Furthermore, not only a possible loan but also the proceeds from the new build minus debts should be available as capital. My simple calculation would be:

550,000 sale of house
-225,000 outstanding loan
- 25,000 prepayment penalty (amount still to be clarified)
+170,000 possible new loan

Thus approx. 445,000 capital for the purchase of an existing property.

Is this simple calculation reasonable or do you already see problems?

Do you have concrete offers for a house for 445 without anything more having to be invested? Purchase ancillary costs, renovation, etc?