What can/should we afford?

Hello everyone,

I have been an unregistered reader for a long time, recently registered, and now I am asking for your assessment.

About our situation:

We (me 31, her 28), both tenured civil servant teachers A13 (me for life, her still on probation, in 2.5 years for life). Net income currently (me 2650 (from June age-related approx. 2750, her 2250, will be 2550 from July).
That makes a total net of 5300 from July. (PKV already deducted, actual net)
Currently, we pay about 800 euros rent warm. I put aside about 1500€ each month, she about 1000, due to the dogs and slightly higher travel costs, maybe a bit more.
We both have a car, both fully owned by us (no loans).
She still has BAföG debts, which can only be paid off in a few years (then about 7.5k).
Otherwise no loans or obligations, no children yet, but planned, two dogs already there.

I am initially the only one contributing equity. Of the available money, about 40k would be contributed, the rest is to remain as a small buffer in the account.

We can/want to do very few own services because we are both not very skilled in handiwork. There are few acquaintances around who are very skilled and have time to help.

Financial advisors always want to "sell" us way too much money due to the double civil servant status, at least according to me. Sometimes they talk about up to half a million...

What do the experts here in the forum say we could/should reasonably afford? We are currently undecided between new build and existing property. A new build as we imagine it costs us about 400,000 with everything included (land about 100k, house 250k, incidental costs 50k) costs for land register, broker, etc. included.
Existing properties are a bit cheaper, but you always make compromises and don’t know when the roof, heating, etc. have to be replaced. Is an existing property really cheaper?

We would like to calculate the whole thing based on one salary (mine), which could be quite tight, and use the 2nd salary for special repayments or vacations, etc.

What do you think would be reasonable? What would be your comfort zone?

Thank you very much and I am curious!

My comfort zone is completely different from yours, so you have to answer this question yourself. I would simply record what I need and consider when I want to be finished. Whether that then works through repayment in the loan or special repayments must also be determined individually. With a very steady income like yours, I would repay more right away. The repayment rate can often be adjusted at many banks if, unexpectedly, children come along...

Currently, new construction is not much more expensive than old buildings and, in the long term, is sometimes even cheaper, but it depends on the location. In the very rural areas, you can find used bargains, but you won’t get much more back when selling either. In urban areas, old properties are currently traded at astronomical prices, so I wouldn’t consider anything used there.

Supplement...

Bank calculation with your salary would look like this:

2650,-
- 1000,- living expenses for 2 persons
- 425,- ancillary costs and maintenance (2.5 per m2)

So roughly 1,200,- repayment possible, children balance out through child benefit in their calculation. At 2% interest and repayment (20 years) each, that would be almost exactly the 360k you need (40k equity). Using KfW loans or a shorter term would mean less interest.

First of all, it must be said that you are in a very good starting position. You earn decently, have no consumer loans for consumption, are (almost) civil servants and apparently also take care of future financial aspects. It is particularly worth highlighting that you already save a quite decent amount, so you are used to a high financial "effort."

Now, in my opinion, you should become clear about what / how / exactly where you want to build / buy. Due to the completely open question, any generalizations are out of the question. New construction is often visually quite expensive, but it is then also "truly" new. This may save ancillary costs, since the new house will generally consume less energy and required maintenance expenses should of course come quite late in time. The purchase of an existing property is naturally also an option, especially since it can often be taken over and moved into quickly. Here, in case of serious purchase intentions, a building expert should inspect the substance and compare the result with the currently demanded purchase price. An existing property may have a very special charm, but you will have to take it as it stands and lies.

The "bank calculation" listed in the previous post has not come across as simplistic to me after more than thirty years in banking, and I also find a repayment rate of only 2% at the current interest rate level rather too low. This especially applies to your good possibilities.

There are some good books available at consumer advice centers on the topics of real estate purchase, financing, and new construction projects. There you can also have your financing offers reviewed once you have completed your first bank discussions.

I find it important that you generally do not trust commercial "house sellers" right away, but rather obtain as comprehensive an overview of the market as possible and examine the offers as neutrally as possible. If you then want to make a closer selection—in the case of a new construction project—inform yourselves here, in other forums, at Creditreform or through your house bank about the creditworthiness of the general contractor or—in the case of an architect-accompanied construction project—about the reputation of the architect. Here I would also have a number of reference projects shown to me and would not hesitate to knock on the doors of homeowners.

Given your income (assuming normal expenses), my comfort zone would probably be around €1,500 monthly installment as a limit.

With all due respect, as long as there are no concrete numbers and above all no project, then it is initially just as "flat." I could have also said: For every hundred per month, there are 30k from the bank; as a rule of thumb, that is enough. No consumer loans for cars, televisions, etc. make the household calculation for the first rough estimate quite simple. At such a point, as a potential property buyer/builder, one first needs very rough numbers to steer oneself into realistic channels. At such a time, one simply wants to know in which amounts one may think, and that is what my approach is meant for. It will get more detailed soon enough, and you also cannot avoid an appointment with the banker. Where you are right is the repayment, but if you seriously want to calculate it based on one salary and the mentioned numbers apply, then simply more is not possible.

The level of the presented income/expense calculation is at the level of a bank trainee in their second year of apprenticeship. I don't think a teacher (or a couple) would be satisfied with this at this point. In this respect, Voki's statements were correct and important.

Another approach would be to set your current cold rent plus regular savings as the installment amount. You already know for sure that you can currently afford these two amounts. Then just consider reduced income due to parental leave and voila... result.