What can we finance?

I think the answer is: yes, you can finance the amount.

The question is rather, DO you also WANT to?

Of course, there are always circumstances that can cause such a project to fail; here, the permanent loss of an income is obviously one such point (due to the planned children, or if a separation occurs).

The probability that an orderly exit might be possible - by that I mean a sale at market price, so that you at least come out financially without debt, or at least recover part of the equity - is of course also a point. But that too is a gamble, namely on prices in Munich remaining stable or rising.

Everyone must weigh the risk for themselves.

First of all, thank you again for the many responses.

The €800,000 includes, as mentioned, all costs plus a small buffer that we will certainly need. The only things missing are the furnishings and garden design. I have also based this on the costs listed in the forum under "Liste anfallender Baukosten". However, we will have the final construction performance description from the general contractor reviewed by a professional and will certainly receive further input there. It is definitely worth the money to us. Additionally, I have included a surveyor who will accompany the inspections. I simply know too little about it.

Regarding the land value / property value. In recent years, we have been in contact with several real estate agents and financiers who are familiar with the local conditions. All agree that in Munich and the surrounding area, prices are at best stagnating. Why? Because the demand and capital are simply there. With our equity, we are well below the Munich average. That is also why I asked in the forum. If something should happen, we are well covered by insurance, and in case of separation, the house would have to be sold.

Regarding the timing, we also considered waiting. But honestly, we wanted to have the house-building issue off the table before everything revolves around children. From experience, having children makes things a bit more constrained than without . Our apartment would certainly still be sufficiently large for a few more years. However, if we later need a 4-room apartment, that would only be possible at significantly higher costs. In the past two years, no one in our circle of friends/colleagues has managed to rent a 4-room apartment for under €1800 cold in a decent location. Just the thought of burning over €20,000 a year on rent alone makes me feel quite uneasy.

Since the plot of land is reserved, we will now reflect, hold further discussions, and then make a final decision. I will let you know the outcome.

Just the thought of burning over €20,000 a year only on rent makes me feel very different.

Completely the wrong attitude. I have gladly paid rent for over 15 years... every euro! For that, I was always able to live well without stress. The best part: I had no work with it.

The idea that rent "burns" money is actually not very sustainable mathematically.

Firstly, it can only be about the difference between the cold rent minus the interest on the alternative property ownership loan - in your case, interest on approximately 650k credit!?

Secondly, reserves for maintenance also go into the calculation - at the expense of owner-occupied property.

Thirdly, to be fair, the equity would have to be calculated with an assumed return for the home - and this compared with the return at which the equity could have been alternatively invested. This also usually works to the detriment of owner-occupied property.

All of this is admittedly not trivial to calculate. Assumed returns and rent increases based on historical series are estimates that only allow rough results. Annuity loans with continuously decreasing interest portions do not simplify the consideration.

Basically, it remains to be stated that the statement "rent burns money" stands on shaky ground.

The advantages of owner-occupied single-family homes are:

- Freedom of decision in many respects

- The agreed interest rate applies constantly over the term, while rents can be raised

- Certainly, no one will evict you from your own four walls

If I wanted to rent the mentioned nice apartment in my city, I would have to spend my mortgage payment as the cold rent (I have already seen a terraced house 90m², small garden for the money, great!). For the interest that I will (initially) pay, I could barely rent a prefabricated apartment (cold). It is also noisy at my place, I hear far too much from the neighbors for my taste, and below me, there is smoking almost every time of day... oh no, I am really looking forward to having my own place and I think I will be better off with that than with a rental apartment. Ultimately also financially. The OP should also manage significantly below the mentioned rental apartment with his interest rates. (750k€ loan at 2% - 1250€ per month)

First of all, many thanks again for the many feedbacks.

The €800,000 includes, as written, all costs plus a small buffer which we will certainly need. Only furnishing and garden landscaping are missing. I also orientated myself on the costs listed in the forum under "List of construction costs incurred." However, we will have the final construction service description from the general contractor checked by an expert and will surely receive input there. The money is definitely worth it to us. In addition, I have factored in an expert who will accompany the inspections. I simply know too little about this.

Regarding the plot value / object value. In recent years, we have been in contact with several real estate agents and financiers who are familiar with the local conditions. All agree that in Munich and its surroundings the market is at best stagnating. Why? Because the demand and capital are simply there. With our equity, we are significantly below the Munich average. That is also why I asked the forum. If something should happen, we are well insured, and in the event of a separation, the house will simply have to be sold.

Regarding the timing, we also considered waiting. But frankly, we wanted to have the house-building topic off the table before everything revolves around children. From experience, you are a bit more constrained with children than without. Our apartment would certainly still be sufficiently large for a few more years. However, if we later needed a 4-room apartment, this would only be possible at significantly higher costs. In the last two years, no one from our circle of friends/colleagues has found a 4-room apartment under €1800 cold rent in a decent location. Just the thought of burning more than €20,000 a year only for rent makes me feel differently.

Since the plot is reserved, we will now reflect, have further discussions, and then make a final decision. I will let you know what comes out of it.

Please split the €800k into the individual positions so that we can get an idea. The financing broker surely asked you that question as well.

Basically, your arguments are indeed not sustainable, as you can see from the comments here. Many would probably write differently here if the equity matched the construction sum, as otherwise everything fits so far. I am curious about the construction positions. You yourself also write that your equity does not correspond to the usual requirement.