Single-family home financing - thoughtful after first bank discussion

We also still have the topic of parental leave ahead of us and have taken it into account for the financing planning. Since starting a family is already a relatively imminent topic, we will initially go into the financing with a lower payment rate and then increase it later.

With most banks, you can make several such adjustments to the repayment rate free of charge. Then, during the parental leave period, only 1-2% repayment is made, and afterwards, when the wife returns to full-time work, the rate is adjusted back to 3% or more.

Besides, it’s not like your wife doesn’t get any money at all. If she stays at home for only one year, there is 65% of the net parental allowance for that year. And if she later goes back part-time, thanks to the tax progression, the net loss is not so great. Although it is only 50% of the former gross income, it might be about 70% net.

If both earn similarly, as in your case or ours, then the calculation of paying off the loan with the income of a sole earner only works to a limited extent. For this, short-term unemployment up to 1 year, illness, parental leave, etc. can usually be easily managed by foregoing vacation and suspending savings formation without the financing faltering. For example, we indulge in the luxury of 2 cars. In times of crisis (e.g., occupational disability), one could also make compromises here and do without the second vehicle. Overall, a mid-range vehicle costs about €400 per month. That is almost half of our planned installment.

If a couple has only one main earner and that main earner is lost, then the whole financing goes down the drain.

You must not compare earlier times with today. Back then, insulation was not necessary, single glazing was enough, and energy costs were not relevant during construction. Today, higher energy prices for manufacturing materials and the increased equipment simply cost more. Also, converting Euro and DM 1:2 doesn’t work. We have a total construction cost of almost €400,000 for a single-family house with 145 sqm including everything. Convert that into DM and consider what you could have gotten for just under a million DM back then. Our house costs €225,000 plus additional construction costs. And probably your roughly calculated price is still far from the end of the line. I find the approach of capping the monthly rate at €1,000 positive. That’s how we did it too; if my wife completely stops working after the baby break, we can pay these €1,000 from my salary. Similar to you, there will be little left for living, but it’s enough. This is basically the worst case. However, since my wife is highly qualified and we work in very flexible jobs, the probability = 0 that she will completely stop working. You need to consider these things as well. We were also surprised that we apparently still belong to the low earners — at least when it comes to evaluation by banks. I seriously wonder how a craftsman ever gets a loan.

In the end, this question can only be answered with a counter-question: Why does everyone nowadays think they have to own their own house?

The question is very easy to answer. In boomtowns like Karlsruhe, Stuttgart, Munich, and so on, rents are exploding. What we pay in rent for a drafty old building, we now pay as the house installment. Here, 80 sqm in a new building costs up to €1,300 cold rent, or as with us in an old building €700–900 cold rent.

In addition, the investment options banks offer are useless... Overnight money accounts destroy money, and who invests in stocks with any sense? I’m just saying Lehman and co. Such things will keep happening... ask the Facebook shareholders. Building society contracts are money destruction par excellence, and life insurance policies are no longer worthwhile either... What still generates a bit of return are photovoltaic systems, and guess what you need for that... your own roof.

Certainly, not every current builder can afford the construction. The colleagues will find that out in 10 years when the fixed interest period expires. We also have such specialists among acquaintances. They are already calculating their wages in 10 years but have forgotten the price increases in other life areas...

What still gives you a bit of return are photovoltaic systems, and guess what you need for that... your own roof

Wrong, to secure a decent tax advantage with a photovoltaic system, a foreign roof is much more suitable... Just wanted to say that...

Otherwise, in our area it is like this: in the past everyone had their own house, which was mostly built entirely by themselves, hardly imaginable today.... Well, but somehow I think something like that is passed on to the next generation and everyone wants to build and have their own place. I recently looked at a financing plan at a friend's place. €350,000 completely financed over 10 years, great.... but what happens after ten years? You can't and shouldn't compare earlier times with today...

Where I have to disagree a bit is this general phenomenon here in the forum: pay off as much as possible, preferably right from the start and many extra repayments! One should always keep one thing in mind when building a house: if you only live for and pay off the house, it eventually stops being enjoyable. And believe me, debt nowadays is not the worst thing! You have to find a healthy middle ground, and for example, I don't mind paying off over 35 years if I know that during those 35 years I didn't have to completely restrict myself.

My advisor said it would be tight: after deducting living expenses, house incidentals, etc., I would only be able to pay €800 - €1,000 per month for interest and repayment.

Paying €1,000 out of €2,300 as a rate and then supporting a family is really quite tight!

It is simply a fact that you cannot build a 150m² house with €2,300 and support a family on the side, at least not without significant restrictions!

With two earners, of course, all this is no problem... i.e. you are dependent on your wife earning money again as soon as possible! You have to be clear about that and your wife must want that too, and there must also be childcare options! Could your wife, for example, work part-time in her profession?

Wrong, to secure a decent tax advantage with a photovoltaic system, someone else's roof is much more suitable... Just wanted to say that...

You're right about the taxes, not about the return. I’d rather pay 30% tax on the profit and still keep the remaining 70% of the profit than have a loss and get some taxes back for it.

If you think that everyone in Germany wants homeownership, you should take a look at Germany in comparison to Europe. Germany is by far lagging behind in the share of homeownership.

On the one hand, this has historical reasons due to rental housing construction and comparatively cheap rents. But it’s probably also related to the fact that in the southern countries three generations live under one roof in a small house, whereas we need 150m² for three people. Also, everything has to be perfect here. For example, in Crete houses are not finished. In at least 70% of houses, the reinforcement still sticks out at the top, and when a new child arrives, another floor is simply added. The background is: no taxes had to be paid on unfinished houses (at least until a few years ago).

So if you free yourself from that, even an average earner can afford a house. Then it’s just 120m² instead of 150m². The garage is built later, the furniture including the kitchen is taken along.

You are right about the tax, but not about the return. I would rather pay 30% tax on the profit and still keep the remaining 70% of the profit than have a loss and get some tax back for it.

I don't want to leave it at that so generally now, as this depends strongly on the individual case. Especially since you already have considerable scope for structuring with the "foreign" roof. *clears throat*