Small salary - is building possible?

Hello forum members,

For some time now, we (my wife, 31, and I, 32) have been considering building in order to offer our daughter (6 months) more than just 3 rooms. After much reading and studying here in the forum, I realize that every financing is super individual. Therefore, I am reaching out to you today directly to get your opinion on what we can actually afford when it comes to building.

Our current situation:
My income: 2,100,-
My wife: 0,- + child benefit (currently on parental leave - we do not want to count on a second income at the moment (yet))
Equity: 160,000,-

At the moment, we live in a condominium which is fully paid off. The consideration is that we do not want to sell it but rather rent it out (around 800 EUR rental income). But since the rental income might not be reliable, we do not want to include it in the loan calculation - however, it could increase the possibility of making a special payment later.

We currently have a plot of land in sight for about 80,000,-... so half of the equity would be used up...
What do you think is possible?
In short, our situation is: relatively small income and relatively large equity.

I would be very happy to hear your thoughts.

Assuming now from my house provider (prefabricated house on a slab foundation), and taking the basic price quoted to me for a house with a living area of 110 sqm, so the smallest model, that’s a cost of about 160,000 + 30,000 incidental building costs, let’s say around 200,000, since there’s always something extra.
The house is almost finished, so without flooring and wallpaper. (For that, if you don’t buy the cheapest, you can already calculate almost 3,000-5,000.)

So I estimate that you will have to finance about €150,000 through the bank. As far as I can roughly estimate, with your equity share, that can be serviced with about 500-600 monthly installments at a one percent repayment rate. If I understand correctly, your wife wants to earn extra again at some point, because you should increase the repayment share so as not to risk having to finance a relatively high residual debt after 20 years possibly with very high interest rates. My advisor once shocked me with the calculation of my loan with 8% interest... holy moly.

Due to your high equity share, €160,000 in cash, it should be no problem to find a bank that will give you the loan. But be careful to compare well... keyword independent financial advisor.
The condominium is added to your assets? So does it belong to you?
Depending on the value, you could certainly consider selling it and then building bigger. Because as you already said, rental income is uncertain if you don’t live like us in Karlsruhe, where there is an extreme housing shortage. Also, a rented property always comes with hassle... changing tenants, repairs, in the worst case rent dodgers. It doesn’t have to, but it can happen.

I think it’s very sensible that you calculate pessimistically and don’t try to artificially boost your income right from the start. Child benefit belongs to the child, not to house financing.
Calculate about €300 ancillary costs per month for house maintenance... so trash, electricity/gas, sewage, property tax, and reserves for repairs etc... But since you are currently owners, that shouldn’t change much.

We are financing a slightly larger building project with a €250,000 loan and about €130,000 equity. I will have to pay a monthly burden of €900 + €300 house ancillary costs, so €1,200.
That is an amount I can just about pay from my salary, without my wife earning extra. That’s how it should be approached... worst case keep the whole thing financeable on one income, and if then a second income comes in again, use that money to repair the car, make special repayments, buy new furniture etc. Such things are not feasible from your, and admittedly then also my, income.

I hope what I wrote helps you to better assess the whole thing. Don’t let yourselves be rushed in the decision, and maybe start by making a financial plan of how much you actually have left each month and how much it would be optionally more. Think about the annual costs for car and insurance. A good financial advisor will anyway require you to lay everything bare in order to assess your situation. Then you can start looking for a house company and get an initial offer made to slowly get a feel for the actual costs. Above all, compare what is included in the price, providers differ enormously here. So the price at the end is usually meaningless.

So now I’ll stop, that was quite a lot I think.