Single-family house financing €950,000; loan amount €750,000, equity €200,000

Hello everyone,

my wife and I have the opportunity to buy a single-family house built in 2017 from a private seller. We have been searching for 2-3 years now, but the location in Bavaria – especially in the Munich commuter belt – is simply a disaster. However, this great opportunity has now arisen for us to buy a house in a community of 8,000 inhabitants about 50 km from Munich. Since we are both more than just excited about this house and one might not decide completely rationally in such a condition – simply because you want it so badly – we decided to ask for advice here in the forum on whether what we are planning is even sensible.

General information about us:

[*]Who are you?
Matthias and Luisa, married since 2019
[*]How old are you?
32 and 30
[*]Do you have children?
1 daughter, 6 months old
[*]Are children planned?
yes, at least one more and soon
[*]What do you do professionally?
both civil servant teachers
[*]How many hours do you work?
Full-time and parental leave

Income and asset situation:

[*]What income do you have (gross/net)?
Me: 3600 net, wife theoretically also in full-time, but currently and at least until 2024 due to parental leave and part-time 1800 € net. At the new school year, my wife will start part-time again for this amount. Our little one will then be cared for by grandma two days a week until midday. So our family income is at least about 5600 € for the next 3-4 years without special payments or tax refunds. From kindergarten age there will certainly be the possibility for my wife to increase her working hours again, so household income should noticeably increase (at least 500 €). Our salaries also increase annually by almost 2% on average, and currently we also move up a pay grade every 3 years (about 100 € net). So our family income will rise significantly in the foreseeable future. If the children attend secondary school at some point, there is also the plan for my wife to work full-time again.
[*]How much child benefit do you receive?
219 €
[*]How much equity do you have?
220,000 € (of which 170,000 € self-saved, 50,000 € contributed by the parents-in-law)
[*]How much equity do you want to put into the house project?
200,000 €, so a loan of 750,000 € would be needed.

future household costs:

Since we have not kept a household budget or anything like that so far, I just estimated our monthly expenses or extrapolated expenses that we have not had yet.

[*]Fixed costs
private health insurance and long-term care insurance 2x: 466 €
insurances (disability 1x, liability, household contents, legal protection): 100 €
subscriptions, mobile phone, internet, broadcasting fee: 135 €

That makes in total: 701 €

[*]calculated monthly house ancillary costs:

[TH][/TH]

[TH][/TH]

Heating costs	180.00 €
Electricity	120.00 €
Water	120.00 €
Heating maintenance	40.00 €
Street cleaning	25.00 €
Garbage collection	30.00 €
Residential building insurance	100.00 €
Property tax	70.00 €
Sidewalk cleaning	10.00 €
Chimney sweep	10.00 €
Maintenance reserve	200.00 €

That makes in total: 905 €


Flexible costs:

Groceries (VP)	600.00 €
Leisure, entertainment, vacation (U)	300.00 €
Personal care, health (KP)	100.00 €
Household goods, furniture (HW)	100.00 €
Clothing, shoes (BK)	200.00 €
Accommodation, restaurants (BG)	100.00 €
Transport, maintenance (VK)	450.00 €

That makes in total 1850 €, with all amounts really calculated VERY generously for us (at least currently). At present, we definitely need much less and a bigger vacation would have to wait under these circumstances. So there is certainly a large savings potential there. Likewise, I believe the house ancillary costs have been deliberately calculated slightly too high. Only the car item worries a bit. Although we own two cars (station wagon and VW Golf), both in top condition (30k and 80k kilometers) and only 2 and 6 years old, something can always happen... if necessary, some of the maintenance reserve for the house would have to be used. For a 4-year-old house that is really in top condition and where only absolutely high-quality materials were used, hopefully nothing really expensive will come up in the first few years...

After deducting all the costs I have now listed (5600 € income minus 3456 € expenses), 2144 € would remain for repayment. We would actually like to be able to pay this amount because a) we think we have calculated very carefully realistically and also considered items that offer savings potential and b) our family income will rise again in the foreseeable future and c) we can live frugally for a few years.

What do you think? Would this be way too risky for you? Have we forgotten something really important?


About the property:

[*]How big is the plot?
approx. 700 sqm
[*]New build, old building (year built), type of house?
New build 2017, fully basemented
[*]Garages?
Double garage
[*]How big is the house? (living area / usable area)
225 sqm
[*]What is the market value of the land and house after completion?
unknown, but the market price seems to me after really intensive research over the last years to be definitely over 1 million.

Purchase costs: 950,000 € including all incidental purchase costs (slightly under)

other costs:

[*]Kitchen costs
Fitted kitchen for 30,000 € new price included in purchase price
[*]Furniture, lamps, decoration
Lamps and built-in wardrobes in dressing room included in purchase price, almost all our furniture would come from our current rented apartment since everything is new and high-quality.

Cost summary:

[*]Total costs
950,000 €
[*]Deductible equity
200,000 €
[*]Financing amount
750,000 €

Through a very good acquaintance of my parents, who apparently still owed them a favor, we have more or less already a financing commitment at an interest rate of 1.05% with a fixed interest period of 20 years (private bank). After this period, with a monthly repayment of 2200 €, there would still be a residual debt of about 335,000 € open. Without special repayments, mind you. Of course, in the first few years not much will be possible in this direction, but hopefully later when we both earn full-time again. Solely through our step increases and the annual salary increase of about 2%, my wife and I would together earn about 10,000 € net in 15 years (both full-time). Through various special repayments, we should hopefully then be below the amount of 300,000 €. We would then be 52 and 50 and still have enough time to pay off a follow-up financing...

What do you think? Is this possible? Or would you have major concerns somewhere? What I have not mentioned so far and actually should not play a role is that both our parents would probably help us financially at any time. But we don't want that.

Well, this got a bit longer after all. Many thanks for reading and we would really appreciate your suggestions, tips, concerns, and questions.

Best regards,

Luisa and Matthias

A few questions: 2017 and new construction? From private? Why are they selling? Are they selling below value, and if so, why? Was an appraiser involved? How far will the babysitter grandmas live then?

I can contribute little to the financing. Personally, the amount would make me feel sick – but we also do not get anywhere near what you receive in salary every month.

I find your monthly ancillary housing costs set a bit too high. Overall, one or the other item may be missing... but somehow that will balance out.

BUT:

almost all our furniture would be brought from our current rental apartment, as everything is new and high-quality.

Household goods, furniture (HW) 100.00 €

That doesn’t add up! How big is your apartment that you can satisfactorily furnish a house over 200 sqm? I’m telling you: wishes will come, and new purchases will come too. It won’t stay at just a 100€ side table. Then garden furniture, grill, lawn mower, etc. I don’t want to be petty or arrogant, but that can easily be 1000€ per month if you buy what is currently on the market. But maybe this is overestimated now, since you have equity, and from that you could still set aside 20,000€ (in addition to the calculated curtains, etc.) Let’s see what the other experts here say.

Well, you saved well with the salary. How come, did you live rent-free?

Well, 5600 and 750k debts. That would be too much for me, but the Munich area after all.

From the €3,600 net you can already directly deduct your private health insurance with €466, and your earnings are just under €3,100, which is certainly not bad but in my opinion clearly too little to take out a €750,000 loan, especially since you will soon have 2 children and your wife can only work part-time. Your wife also has to pay €466 private health insurance. She earns €1,800 during parental leave - leaving €1,400 - which makes a household net income of just under €5,000 - not even...

If your wife starts part-time, it still doesn't leave more - so you will have to manage with €5,000 for a very long time. The income is definitely fine with 2 children, but simply way too little for a €750,000 loan...

You are still relatively young and have a few more years to repay, will receive a decent pension and certainly won't have to worry in old age, however I see the problem more in the monthly repayment.

With such a loan amount you have to repay about €2,200 every month at a 2.5% repayment rate. That is already tough, especially when there are 2 children.

As you also described, you definitely won’t have problems in old age, however in my opinion the next years will be very, very hard.

I more see a loan of a maximum of €600,000 here.

However, if you absolutely want to pursue the plan, I would advise you to perhaps include free repayment rate changes and maybe repay less in the first years and then pay off properly as soon as more household net income is generated. However, personally, I wouldn’t feel good about that somehow.

Actually, the loan amount is too high for your income. At least for the currently available one. And if very soon another child is supposed to come, it won’t get any better, or rather even less. After all, the new parental allowance is only calculated based on the part-time job.

But on the other hand... if the household budget works out? There is a lot of potential to be significantly better off in the long term.
There will certainly be lean years until your wife works again.

Regarding the tariff increase: I also thought it would ease the situation over time. I am paid according to TV-L and my net income is quite similar to yours. But honestly... from a 2% increase, so little actually reaches you due to the top tax rate that it hardly compensates for inflation. Just this year, 10% for the energy item (electricity, gas, fuel) and suddenly the 1.3% more was gone. Of course, I’m not a civil servant, that might look somewhat better (no pension insurance).
If step increases still come, that’s of course good, you can really keep those.

I find the ancillary house costs set enormously high.
For that, I find the item leisure and vacation extremely meager. Are all outings and activities supposed to be included there? A visit to the pool, zoo or indoor playground already consumes 50...100€ for four people. Vacation will then be at the quarry pond.
You probably don’t have any hobbies?
200€ for clothes for four people is also manageable. When I see what is incurred for my two daughters at the season change... phew.
Whether the mobility costs are sufficient is hard to judge. How much do you have to drive? I.e. what is spent on fuel? For one car, I have at least 250...300€ for taxes, insurance, maintenance, and fuel at about 1200 km/month mileage. How far is it to work?
And what is completely missing are costs for childcare. Do you never need the daycare, what does it cost, what does the food there cost? You cannot rely exclusively on grandma, she can’t always be available. My mother, not yet 60, for example, received such a severe diagnosis all of a sudden that she could no longer support me with childcare (it was rather the opposite) and if the treatment had failed, she would not have been there within months... She recovered, but it could have gone differently.

A single-family house with 700sqm of land for this price really sounds like a bargain in your area. You don't get so many chances like that there. Or is there a catch?

I would also feel uneasy about that amount. But we are both civil servants and have naturally thought/calculated a lot about step increases/salary raises. Like you, I also think that in 20 years we will have so much more salary that the follow-up financing shouldn't really be a problem. The first years with children might be tough though. So I would rather take a somewhat "lower" rate and then make special repayments.

Overall the amount is insane. But if you both stay healthy and can and want to work that much, it’s probably manageable. The only thing I thought about: We also have a few grammar school teachers around, but with primary school entry they rather worked less than more. Childcare is not easily possible in every community. Also, I don't understand the 2 days a week thing. All grammar school teachers we know have to show up 4 days a week for a half-time position. With a lot of luck and fewer hours, 3 days. But the other mornings are needed for preparation, grading... What I mean is, maybe you should still plan 350€ for the daycare? It won't get easier with 2 kids.