Single-family house: Is the rate realistic? How much house can we afford?

Dear Forum!

My fiancée (33) and I (32) are currently in the initial planning phase of a single-family house. Since we have no prior experience with financing or other planning of this scale, we would greatly appreciate feedback, tips, and honest assessments of our current plans.

The starting point of our planning is that we own agricultural land in a small Lower Saxony village. This land covers approximately 1 hectare, with one side bordering a fully developed street. The other side of the street is fully built up, our side at least partially.

Of the aforementioned land, the “first” 30 meters from the street are currently designated as expected building land. The municipality recently commissioned a planning office with the design for this expected building land, and the planning process is supposed to start this year. We are therefore cautiously optimistic that we will be able to build there within the next 2-3 years.

In that case, about 52m x 30m of our above-mentioned land would become building land (= 1,560 sqm).

Since we currently live in a big city but feel increasingly drawn to our rural home and also have professional opportunities there, we are now firmly determined to take on the risk of building a house there, as in our opinion, the opportunities there are too good not to take advantage of.

We know that we are starting the planning quite early, but better too early than too late. :) Ideally, we would like to advance our plans alongside the building planning process so that we can apply for the building permit promptly once the building plan comes into effect. However, we simply lack knowledge, especially regarding the question of “how much house” we can actually afford.

General information about us

[*]Woman 33, man 32
[*]Getting married next year
[*]Desire for 1-2 children in the next 5-7 years
[*]She is permanently employed in the creative sector at 30h/week; currently loosely searching for a remote job with 40h/week
[*]I am a civil servant in the judiciary (higher service, pay grade R), full time
[*]The house is to be built in a small village with kindergarten, primary school, and bus connection (10km) to the next larger town (>20,000). The nearest big city (>100,000) is about 35km away
[*]Almost our entire family is between 2 minutes’ walk and 15 minutes’ drive away, has supported and will continue to support us in every way (childcare, work on construction/garden, finances, …)
[*]My family is also purely a craftsman family; except for me, they all have proper training and can handle things with their hands. ;-) We therefore plan to do a significant part of the interior work ourselves.

Income and asset situation:

[*]Income:

In the next few months, a lot will improve due to our wedding, step increases, family allowances, etc. Since the building planning process will not be completed before these developments, I assume the income situation from 01/2024.

Me: After deduction of private health insurance 4,500 € net, tax class 3,
Her: 1,265 € net + 40 € deferred compensation + 70 € travel reimbursement, tax class 5

In addition, I regularly correct exams and will continue to do so. For that, I receive an average of 2,600 € / year net, i.e., about 210 € / month.

In total: 5,975 € / month

As mentioned, my fiancée is currently loosely searching for another job that would allow her to work remotely full time. If she simply increased to 40h, we would have about 350 € / month net more available – but we are not currently planning on that!

I will receive further step increases over the next 12 years at two-year intervals (6x) of approximately 200 € / month net each.
There are also annual tariff adjustments averaging about 100-200 € / month net.

In case children arrive, in addition to the statutory child benefit, there would be a family allowance of 88 € / month net per child.

[*]Equity capital: 90,000 €
[*]Plot: 1,560 sqm then building land = 125,000 € (last price for new development area: 80 €/sqm)
[*]About 8,500 sqm agricultural land (bought at 2.50 €/sqm) = 21,250 €
[*]No loans or liabilities

Current housing costs:

[*]Basic rent: 1,310 € / month
[*]Additional costs: 130 € / month
[*]Oil heating: 180 € / month
[*]Electricity / gas / water: 105 € / month
[*]Streaming, Spotify, etc.: 75 € / month
[*]Mobility costs: 0 € - She receives the monthly ticket from work, I ride my bike. In case of building a house, we would need to get a car with which I would initially have to cover 70 km total distance 3-5 times a week. However, I could take over a car from the family, as several are currently largely unused and a car is not a priority for us.

=> Currently 1,800 € / month
=> With a car probably about 2,200 € / month

Variable expenses:

[*]Groceries about 700 € / month (higher costs due to food allergies)
[*]Private expenses, leisure, other “luxury”: 300 €
[*]Dog: 100 €
[*]ETF savings plans: 700 € / month

=> Currently 1,800 € / month

Contracts:

[*]Household insurance: 360 € / year = 30 € / month
[*]Liability insurance: 10 € / month
[*]Dog owner liability: 65 € / year = 13 € / month
[*]Health insurance included above
[*]Internet: 40 € / month
[*]Mobile: 2 x 20 € = 40 € / month

=> Currently 133 € / month

Income and expenditure totals:

[*]Total income: 5,975 €
[*]Expenses: currently 3,733 €
[*]Expenses with car: 4,123 €

=> 2,242 € surplus without car
=> 1,842 € surplus with car

General information about the house construction

[*]1,560 sqm building land + 8,500 sqm “meadow.”
[*]We are immediately willing to give up one of the parcels (13m width = 390 sqm building land + 2,340 sqm “meadow”)
[*]New construction, single-family house, partly one-story, partly one-and-a-half or two-story
[*]Without a basement
[*]As mentioned above, lots of own work in interior finishing

That’s the “hard facts.” We now have a particular house in mind that we would like to emulate. With an unlimited budget, we would replicate it almost exactly right away, but the budget is not unlimited. :)

Our problem now is: Due to lack of experience, we simply cannot estimate “how much house” we can actually afford.
I would base it on the following calculation and just need people to check it for plausibility:

[*]Equity capital: 90,000 €
[*]Sale of parcel: 20,000 €

=> 110,000 €

Monthly available:

[*]Current basic rent: 1,310 €
[*]Current ETF savings plan: 700 €
[*]Current surplus without car: 2,242 €

=> 4,252 €

Less:

[*]Increased mobility costs: 400 €
[*]Monthly savings provision: 1,252 €
[*]Other unexpected expenses: 100 €

=> Total deductions 1,752 €

According to the above calculation, I conclude that we could manage a monthly rate of 2,500 €. This would initially mean making compromises in other areas, but we can live very well with that and are very aware of what this means.

In addition, it should be recalled that:

[*]I will receive an annual net increase of 100-200 € / month and every 2 years an additional 200 € / month net (so by 2030 I will have more than 1,000 € / month net more income than in 2024),
[*]in case of children, child benefit + family allowance would add about 300 € / month net per child,
[*]the above calculation already assumes my better half working 30h per week

Therefore, I consider the monthly rate of 2,500 € quite feasible. What do you think?

Regarding the building costs, based on the above rate, equity of 110,000 €, and the almost non-existent costs for land and development, I assume that we can afford costs up to around 600,000 € without overextending ourselves. That would correspond to a loan of 490,000 €.

At an interest rate of 4 %, we would repay 750,000 € over 25 years. This includes about 305,000 € interest (that hurts…). The principal repaid would then be about 445,000 €.

The remaining debt of 45,000 € I believe we could pay off with special repayments in the final years, in which my salary will be significantly higher than it is now.

Ultimately, I conclude that initially we could afford a tight belt but mid-term a reasonably comfortable monthly rate of 2,500 €, and with targeted special repayments and a timeframe of 25-30 years, a loan of 500,000 €, if absolutely necessary up to 600,000 €, would be manageable.

Does all this make sense? Have I forgotten anything hugely important?

I know I've written a lot and cannot expect anyone to read everything, re-calculate it, and give feedback. But I am already grateful to anyone who might contribute something to our planning! :)

Best regards
T

Have I forgotten something colossally important?

Yes, that you are currently trading exclusively in lemons. Property. You will be able to build and finance a nice little house with the income (unless interest rates are perhaps at 8% in 3 years...). But at the moment, it makes no sense to plan extensively. What does the planning procedure mean? What kind of house is the future development plan supposed to designate? Does that fit your wishes? Is it certain that it will happen that quickly (2-3 years)? This list can still be filled with many more questions. Feel free to plan a bit for yourselves with the knowledge that you can do it. But become concrete when the development plan also becomes concrete. Then there is still enough lead time.

Yes, that you are currently exclusively dealing with lemons.
Plot of land. You will be able to build and finance a nice little house with the income (unless, in 3 years, interest rates might be at 8%...). But at the moment, it doesn't make much sense to plan extensively.

Thanks first of all for your feedback! :)

Of course, we realize that we are extremely early in the process. However, we have been in talks with the municipality for 1.5 years now and the latest official statement is that the zoning plan procedure should begin this year.

At the end of the month, we also have a meeting with the mayor and want to discuss under what conditions we would transfer parts of our land (we still own another 5-meter-wide strip right in the middle of the area) to the municipality. In any case, we are confident that — no matter what specifications the zoning plan ultimately makes — we would be creative enough to build "something" we would be happy with if the zoning plan goes through.

Feel free to plan a bit for yourselves with the knowledge that you can do it. But get concrete once the zoning plan becomes concrete. There is still enough lead time then.

Actually, I think the essence of my question got a bit lost in my long explanations.

The thing is ultimately this: even if it doesn't work out with our own land, we are now determined to take the path back from the big city to home and build there. There are plenty of buildable areas that would come into question.

It will only be decided in the next few months whether we can build on our own property or have to factor in the costs for another plot as well. But even there you have to know what you can actually afford.

Therefore the main question of the thread is: "Is this a realistic estimate? How much house can we afford?"

That is what it ultimately comes down to. That's why I tried to represent our financial situation as honestly and in as much detail as possible. We simply have no experience and there is a huge — potentially fatal — difference whether you can afford €1,500, €2,000, or €2,500 per month. That's why I hoped someone who is going through the same or has gone through it would "take a look" and say whether anything about the calculation itself doesn't add up.

I do not see that you take into account falling income due to parental leave and subsequent part-time work. Both full-time with children must be desired and very few actually follow through with it.

Total income and expenses:

[*]Total income: €5,975
[*]Expenses: currently €3,733
[*]Expenses including car: €4,123

What happens with the current difference? I suspect some mix of "saving" and "consuming"? I would just honestly take another look at where the money is going. (Possibly things like vacation and "treating yourself once in a while" might still be missing...) If you then feel more comfortable, it might be worth keeping a household budget. Alternatively, simply check bank statements from last year and calculate honestly afterwards (a sort of retroactive household budget ;)). I'm no expert, but it's more about being honest with yourself.

Overall, I see it relaxed for now. "How much house" is hard to answer right now with the current interest rate dynamics. I consider a 2500 payment manageable for you (mandatory, this is not financial advice :D)

I don’t see that you consider falling income due to parental leave and subsequent part-time work.

Because the salary distribution is so unequal, I don’t see a huge problem if the plan isn’t that he takes the full parental leave and she basically none ;))

That’s what it ultimately comes down to. That’s why I tried to present our financial situation as honestly and in as much detail as possible. We simply have no experience at all, and there is a huge – potentially fatal – difference whether you can afford €1,500, €2,000, or €2,500 per month. That’s why I hoped that someone who is going through this or has gone through it would "take a look" and say if there is anything fundamentally wrong with the calculation as such.

I would see it like this – you are then in an area where you can get land cheaply. That is nowadays one of the big cost drivers when building. So you have enough equity to immediately buy another plot and then plan a house on it. That’s where the interesting point comes in – what kind of house is supposed to be built there? A simple 140m² gable roof house without much frills, or a complicated architect’s design that drives up costs and would then be 180m² in size? If you can involve your family accordingly, quite a bit of your own work may still be contributed.

But just take €500,000 including ancillary building costs, plus your almost €100,000 that in the worst case would go into an additional plot. Then with a repayment rate of 2.5%, indeed a €2,500 installment would result. That’s initially, of course, quite a lot, and with additional costs you are quite close to €3,000 for living. I would find that a bit too high for a main earner. But if you manage it with your land, so €500,000 hypothetical building costs, ~€90,000 equity to deduct, and your building land-turned property for maybe €80,000 as additional equity, the math already comes down significantly to €2,000 or less per month. That then sounds healthier, considering the kids’ phase..