When is the right time to build?

Are you sure that you want to save your entire income? Without meaning to offend you, but you certainly have hobbies and need to provide for yourself. Or you probably go out, roam the streets... really have a good time,... at 26...! I assume you probably don’t pay rent. With €330,000 you are in the upper class with a living area of about 90m². You won’t pay much interest today (see mortgage interest rate) if you finance a small part. For example, you could invest in a good solar system.
Just an idea... play around with your equipment if you already bring so much capital. That’s just my opinion, because earning such an income at your age is very extraordinary and therefore, why shouldn’t you live extraordinarily???
To answer your question... (also just my opinion): I suspect that we will be dealing with the EU crisis for a very long time. Politicians and banks are dragging it out so long that by then you will have paid off your loan. The EU is not lost yet. Every state has debts! Insolvent but only Greece at the moment. It only gets exciting when we become insolvent. Then I would get cold feet too...

Hello,

due to the Euro crisis, I am not sure when the best time to build a house is.

A little about me: Age 26, income: approx. €2600 net, equity approx. €70,000
Desired house: approx. €330,000
Plot of land already available.

At the moment (and also for the next few years) I can save almost the entire income. I had planned to save for another 5 years, and then I would have a good €220,000 in equity. The repayment would then be quite manageable (even alone).
But because of the current Euro crisis, I am not sure if saving is even good. Would it be better to build sooner (with less equity) and pay much more money in interest? Then you would have to finance over €200,000 as a loan, which is practically impossible. Because of the crisis, I am afraid my savings could be lost (or large parts of it)...

Best regards, meiko

Hello Meiko,
this decision is one you can only make for yourself.
From my personal point of view, I can very well understand your thoughts.
Even before the problems in Portugal and Greece, there were notable professors who developed two scenarios that would allow the heavily indebted countries of the EU, the USA, and Japan to significantly reduce their otherwise unpayable debts (controlled inflation and currency reform).
In my personal opinion, recent events only reinforce this risk even more:
* The ECB has effectively been stripped of its independence by the EU’s requirement to purchase these junk bonds.
* Monitoring of the already too lax control of the EU countries has miserably failed. Consequences for such massive violations of regulations – up to temporary or permanent exclusion from the Euro and ultimately the EU – were not decided from the beginning in a way that they could also be enforced.
* The USA is just as hopelessly indebted as Japan.
* One of the (or the) largest creditors of the USA, China, has just raised its interest rates by 1.5%.

Surely, some economists might still explain the whole situation so that it doesn’t look so dramatic – but to me, it feels bad.

Therefore, we have decided to build another house and have liquidated cash reserves for this.

What you do, of course, only you can personally decide.
On the other hand, €70,000 growing monthly by, say, €2,000 also carries a certain risk (one that others would surely envy you for).

Unlike the previous poster, I think that for €330,000 you can get something quite nice for the house alone. And I am not at all in favor of installing gold-plated faucets just because you have nice equity.
On the contrary, I would consider whether downgrading your house wish might be the better decision.

In this sense, good luck trying to make the right decision.

JoS
Advice – but fair!

Hello meiko,

only you can decide when the right time has come for you to build a house. There are clearly more considerations than just financial ones. It has to fit for you! If you are "ready" to build a house – why not start right away (interest rates are still relatively low). If you are just afraid for your money, then convert your capital into tangible assets.

With a capital stock of about €70,000, your decent income, and a plot of land (as possible security – you don’t have to build on it right now) in reserve, you can already manage quite a bit. A house like you described above is certainly still a bit too much, but how about a condominium, a terraced house, or something like that? It doesn’t have to be fully paid off if you then set up your real family home in, for example, 10 years. You will be able to finance it in any case. Rough guideline: a loan of €200k should be quite feasible for you (with a 10-year fixed interest rate). In 10 years, the euro crisis should also have "resolved" itself.

That’s how I took the step (also at 26) just over a year ago during the low interest period and now live in owner-occupied property. Now, for all I care, a moderate inflation can come...

Best regards

Hello Meiko

I may not be able to give you answers, but I can tell you that I absolutely sympathize
because I am facing exactly the same considerations as you (I am 25).

I am currently looking for a building plot to realize my dream. I also planned to save diligently for another 2-3 years (as I have been doing for 5 years) and then get started.

Due to the current situation, and the situation at home, I want to bring the whole thing forward to May next year (or from May).

So I will follow your post here very closely =)

Regards, Sina