When to build a house? Interest rate / equity ratio

Morning folks,

I, just turned 31, am planning to build a house on a plot of land owned by my parents. The plot is legally located in an outlying area (2 km away from a town of 42,000 inhabitants in Lower Saxony), but may be built on due to a municipal decision, as long as you are a direct descendant of the landowners. For me, an absolute jackpot, because - brief digression: The plot is our absolute dream property, you drive ten minutes to a large bathing lake, have the parents nearby (good for kids), etc. I studied in a big city (by definition ) and work there, but yes – I want to move back to the “countryside” and live there. Possibly someday not commute but get transferred there.

I have about 5,600 sqm of space on the plot.

Looking ahead, I wanted to “start” there at 34-35, but am still very uncertain regarding finances. I am – unless something serious happens – from October a lifelong high school teacher with a small “side job,” netting €3,200 from September after deduction of private health insurance. I currently save €1,500/month in a daily allowance account. So far, there are only €20,000 in it. During my studies and teacher training, I spent a lot of time leaving too large an ecological footprint on the world. Accordingly, equity is still scarce.

My girlfriend is also studying to become a high school teacher but still has five years to go. Then she will also reach the same amount (adjusted for inflation, of course). But for now, she only has side jobs from which she can spare €150 per month for the savings account.

So that makes in three years at a saving rate of €1,700 €61,200 + €20,000 = ~ €81,000 in equity.

That’s rather meager, considering we’d like a 180 sqm house with nice furnishings and high-quality doors, etc. We are not planning a basement because there is simply enough storage space in the area. We will certainly also receive gifts from our families when we tell them how important equity is for a loan.

But all of this is still so vague, because:

At some point, we will inherit, at some point, my girlfriend will probably also be a tenured civil servant, etc. – but the bank doesn’t care about that. Or does it? Ultimately, everything boils down to the question: Should we wait and possibly “risk” an interest rate increase (which doesn’t look likely at the moment, but who knows what will happen)? Also, considering planning for children, earlier would certainly be better. And I certainly won’t get a good financing deal with my equity next year.

I’m just gathering ideas: What would you do in my place? Calmly accumulate equity or take advantage of the low interest rates and just ask around? I’m just starting to think about the costs of a house, etc., so I just wanted to get a rough assessment.

Thanks in advance!

Hello, have you already found out what a dream house might cost for you? Since the plot of land is equity, I don’t see it that negatively. In another thread, someone is financing 450k with 2,450€ net ...

Do you want to build alone, or both of you together? Then the typical things start with gifts, distribution of shares in the land register, etc. How much is the property worth? That also counts as equity.

Your girlfriend is still studying. Is your dream also her dream? Does she like living far away from infrastructure in the countryside? Personally, I find it extremely lonely, about 2km BEFORE the city. Can she work nearby?

If your girlfriend wants to participate, then I might wait until the end of her studies, then she will have an income. Only the current actual situation counts for the bank. An inheritance does not count at all.

The property sounds great. Definitely not for "city kids" but for people who like nature and still don't want to be too far off the beaten path. A property of that size also comes with substantial property taxes if there is a new cabin on it. Do you already own the property? Tassimat has already mentioned other important points (gift, land register, etc.).

If you start dealing with planning etc. today, and given the full order books... nothing will really "get going" with construction for at least another year. With the civil servant position, you are surely "gold dust" to the banks, and October is not far away anymore. I would get started on the concrete planning and not wait forever. A budget of around 400k€ is probably the minimum for your palace. With 3200€ net, however, that is again borderline. So please take another look to make sure everything fits together properly.

Well then: divide the property, have it transferred to you, and off you go. That is more than enough as equity. The 20K€ covers the initial ancillary construction costs aka notary fees, surveying, soil survey, etc. which makes the bank happy. A single income of 3200 net could be problematic, but that depends on the bank.

I'll put it this way: over the next 5 years, loan expenses and construction costs will rise faster than you can save equity. That means spending the "81,000" now and then paying it back to the bank afterward gets you a significantly bigger house than saving the 81,000 now and spending it in 5 years.

One plan would be: get concrete house offers, establish property ownership, obtain concrete financing offers.