The usual question: How much house can we afford?

Hi guys,

I am currently thinking intensively and worrying about the financing question, even though we keep hearing that it is actually no problem for us.

The wish:
We want to build a detached single-family house in the Ruhr area. A house that is big enough for a family with 2 planned (not yet existing) children will probably need at least 130 m² of living space, i.e. it only becomes interesting from about 140 m² of floor space. For that, we can easily calculate around 250,000 € with the various providers (we are currently in talks with various prefabricated house manufacturers), with a garage gladly 260,000 €. At least if we still include a few things like a buffer for fittings and special requests (fireplace).

The plot of land, which we also do not have yet, will cost at least 150,000 € in our desired area, rather more. If you add brokers, notary, real estate transfer tax, earthworks, and so on, it will probably quickly add up to 200,000 €. Here I assume about 400 m² of land, which should be enough, but it can no longer be much smaller if a house is still to fit there.

The finances:
We have equity of about 45,000 €. At least that is the part we want to invest. An interest-free employer loan of 15,000 € can also be added.

All in all, this probably means a bank loan of about 400,000 € (with 260,000 house, 200,000 plot).

Our net monthly income is currently about 5,050 € in total. One civil servant’s salary, one employee’s salary.
In parental leave, the available budget would sink to about 4,000 € for 2 years. Parental leave really worries me.

We would like to fix the interest rate for 20 years, even though interest rates have been rising again for a while. Better safe than sorry.

Is all of this realistic or overestimated? We do not want to go to the absolute limit of our burden and especially still want to save a bit on the side, even if the savings rate would of course be significantly reduced when building a house. In case unforeseen expenses come up, we want to be safe.

I also have not quite figured out how the KfW funding can be included here. The house will probably have KfW55 standard.
The KfW interest rate fix is different from the classic bank loan, but the bank is supposed to mediate all of that. How is that represented through the repayment? Is a first interest rate adjustment made after 10 years (at the end of the KfW term) and another after 20 years (when the bank interest rate fix ends)?

Maybe I am worrying for nothing, but rising land prices and now also rising interest rates are currently causing me slight panic that we will no longer be able to afford this in a few months if we don’t act quickly. The uncertainty about the pan-European economic situation, which has increased significantly again since the weekend, is also doing its part for me. :-/

It would be really nice if you could give your impression based on the numbers and contribute your experience. Thumbs up or thumbs down?

A few questions about that:

-How old are you?
-How much are you currently saving monthly + how much cold rent are you currently paying?
-Why is there only €45K in equity with that salary?
-Is the €45K completely available equity or is it what you want to invest?

Thank you for the feedback.

We are 31 and 27 years old.
Our savings rate is currently 900 euros, cold rent is 750 euros per month, and total additional costs are about 250 euros.
A part of the holiday/Christmas bonus is also set aside, but it is difficult to calculate due to varying amounts, so we prefer to only count on the fixed monthly amount.

The equity is so low because we used to travel a lot around the world, my wife has only recently been working full-time before (studies + legal internship), and my salary has only reached the current level in recent years through many small steps.

In total, we have 65k euros in equity, completely liquid in the short term, but we want to keep 20k euros reserved for unforeseen expenses. A house construction is supposedly always more expensive than planned. We want to avoid having to provide additional financing if possible.

I find the savings rate concerning given the income. If €1000 is lost during parental leave and there are additional expenses for the child, you won't have much left for the installment from the €900 + €750. Whether the woman can return to full-time work after parental leave remains to be seen. Then there's the second child, where parental allowance might be calculated based on part-time salary.

For €400,000 you need to plan for at least €1500 annuity (probably more) + reserves for the house + increased additional costs compared to the current apartment. According to your information, you might just barely manage that currently, but with a child?

In my opinion, the problem for you is not the income, but rather the expenditure side. Maybe you should go through it / keep a household budget, etc.

The savings rate has not yet been adjusted after becoming a civil servant and finishing the training period (which has been the case for half a year now, during which the available monthly income increased by about 1000 euros). I occasionally put some money in the bank on the side. Since this happens irregularly, I have not factored it in firmly yet, but we can definitely save more.

As for expenses, you are right. I also recently started keeping track of why we spend so much money. But we can probably maintain the spending standard from before becoming a civil servant, so the savings rate of 900 could be increased to a good 1900. Even if we only add half, 1400 + 750 already looks better. Special expenses are not currently planned. But will that be enough then?

On the side of additional costs, we should be able to manage with 350 € for 130 - 150 m², right?

Only during parental leave is that not really possible. It would probably be tight then. Difficult. After parental leave, it should work even with a part-time job, at least that must be the premise; otherwise, we can forget the plan altogether. At least vacations will also be cheaper then; long-distance travel is not on the agenda with a newborn at first.

All in all, I have the feeling that it should actually fit well, even without major restrictions, but I am somehow unsure given the large sums involved.

Thank you very much for your effort, Musketier! (Any further feedback is naturally welcome.)

With 1900€ it of course looks much better.
Banks calculate additional costs between 2.50 and 3€/m². Of course, you should also build reserves for future maintenance of the house. I have planned 300€ monthly for this in my calculation. However, we will put the money into special repayments for the first 5 years.

On the topic of vacation
We still flew with our little one (will soon be 2). However, we chose nearby vacation destinations (max. flight time 2.5-3h). So far, that has worked quite well. Up to age 2, kids cost nothing unless you insist on an individual seat on the plane.
So the trips won’t get more expensive or may even be cheaper for now. It only gets expensive when school starts and you absolutely have to fly during the holidays.