Which financing (type/components) should we consider?

Hello, in this situation I would set a period of 12 months during which expenses are reviewed (insurances - are all important ones in place? Possible optimizations for the contributions? Mobile phone contracts? Will the car still last a few more years?). Keep a household book in which you list exactly where the money goes. Eating out, vacation, what do you want to afford on a long-term basis? This year you should save as much as possible so that you do not have to finance costs for property tax, notary, and as much buffer as possible through the bank. During this time, I would also stay in the small but cheaper apartment. Maybe the parents can contribute something? This year you can look at model houses, make lists of what you definitely want and what would be nice. Prefabricated house? Solid construction? How many square meters? Basement? What type of heating? How big a garden? Read here in the forum what ongoing additional costs a house causes - that must also be paid with the installment later. Then, in one year you will have a completely different starting point - you know what your dream house should have and which installment you can really afford in the long term. And the bank is not interested in what you earn in 10 years, but what is currently on your payslip. So please do not calculate with a low initial repayment either, because you might earn more later.

Good evening everyone,

first of all, thank you very much for all the responses. I am really positively surprised that you show so much interest and write so diligently. I want to address a few answers and hope that the discussion is not over with that.

: it's a bit amusing that you basically ask the question about the equity right under the post. But the question could have come from us as well.... I also like to overlook things sometimes .

Regarding the topic of living well: sure, the private jet was not doable but I earned acceptably as a working student alongside my studies.

Regarding the comparison between the rent price and the price for the purchase property: I admit that my personal tendencies are reflected in the prices mentioned. But the prices are not taken out of thin air. The rent price includes the warm rent of a well-located rental apartment with plenty of space (4 rooms) for a second child, which we recently viewed. Included were two parking spaces and I have calculated in the electricity costs that the landlord provided.
The house is a semi-detached house in a neighboring town which was also viewed. The price for the house is still negotiable. On the whole, the house is very well maintained and at most in need of renovation.... meaning wallpapers, a bit of paint and then "MAN" is home. I am aware that the rooms first need to be filled when you move directly from a two-room apartment into a house but we already have furniture for the most important rooms.

: 2000 euros per month is really a bit much especially if you want to put money aside in parallel for hard times.

: On the whole you are right. That is probably the most sensible approach in our current situation and I also very reluctantly calculate with a high salary in the future (wishful thinking). I mention it only so as not to rule out later adjustments to the repayment rate.

Even if I don’t finish in 30 years, can I not care? Even if I still have a residual debt of 50% after 30 years it is still better than paying rent. Or do you see it differently?

I understand that the purchase ancillary costs break my neck in the beginning. But don’t any of you bankers have an idea how to cleverly circumvent that.
We exclude financial injections from the parents here, since I earn much more and they have already helped me enough.

Night

For existing properties, the advantage is that the house is already standing. If it is an interesting object, definitely take an expert with you who can tell you if there really is no "real investment backlog." Yes, I have read your situation, it is a typical course: finishing studies, young, little to no equity and now starting to build a nest because of [Nachwuchs].

In general, I see it similarly with buying instead of renting. Only if you expect a remaining debt of 50% after 30 years, that's quite tight, especially since it's a used property. With a new one, you might say it's still in good condition structurally, but if it's already 20-30 years old now, after another 30 years more than just painting will be necessary. Depending on how old the house already is, a new heating system or windows, etc. could be due soon. If you're already calculating so tightly that the financing is planned for over 40 years and you want another child, then any repair (also e.g. to the car) could break your neck. I once used a loan calculator; if you need 420,000 and get 2% for a 100%+ financing, then for 40!!! years that would be just under 1300.- loan installment, plus at least 300.- additional costs. Reserves would definitely have to be built up as well, so the house would at least swallow just under 2000.- (including additional costs). Can you live with 1700.- as three, or what does it look like if another child comes?

If I may add something as a banker: Your idea of still having 50% of the remaining debt at retirement will become a problem with this comparatively high amount and the new legal regulations since 21.03.2016 ("Mortgage Credit Directive - Mortgage Credit Directive). The bank must be able to demonstrate mathematically through appropriate household calculations that the assumed installment at retirement is manageable with the then expected income. If, on the other hand, you come straight out of university, you probably won't have any large private pension contracts yet. So only the statutory pension + possibly assumed new contracts would remain. With 50% remaining debt at retirement and a "normal" interest rate assumed by the bank, it will be a tight situation!

At the moment, I would clearly recommend to you: Don’t do it!

I have noticed in recent years that even moving from one rental apartment to another is not exactly cheap (new wallpaper, new curtains, new lamps, new furniture, the move itself, etc.). Still, you should know when you are getting in over your head. And I think that is exactly what you are doing right now.

1. I still don’t believe that you will manage with €360,000 or that you will get the same value for it. For €1400 warm rent, I think you can get an apartment with 4 rooms and 120m². But then you also have a cellar room, laundry room, etc. included. You also don’t need space for house technology (heating, electricity, water, etc.). To have comparable space in a house, you quickly need 150m² or more. In our area, we paid €1100 warm rent for 4 rooms and 150m². We did not find a comparable house for €360,000. Even now, with significantly worse infrastructure, it is still more expensive price-wise. In the same residential area, we were between €450,000 and €550,000. And nothing was special there. Or around €300,000 but in need of renovation. Have this checked carefully with an expert. Anyone who says that a house built in 1975 without major renovation just needs new wallpaper is lying to you straight in the face.

2.) As you already rightly pointed out, the step from 2 rooms to a house is not a small one. Besides a lot of new furniture, there is quickly a kitchen involved that you don’t get for just €5000. Have you thought of garden tools? Lawn mower, wheelbarrow, hedge trimmer, snow shovel, etc. all cost a good amount of money.

3.) Make sure you understand how much you earn per year and how much money you want to borrow. That is already a significant ratio. Of course, you can plan to still have a residual debt after 30 years, but 50%? That’s possible if you don’t have children and then sell the property at retirement age to live somewhere else (Mallorca, assisted living, Maui Maui, etc.). If not, you would be leaving your children a substantial mortgage: €200,000 debt and a house in need of renovation. If your children don’t want the house, you basically have no choice but to sell because you won’t be able to pay the installments during retirement age, unless you actually expect very significant salary increases. Full financing (and you are already well beyond that) currently hardly goes below 2%. I think 2.3-2.5% is realistic. Let’s assume a monthly rate of €1300, then you need 40 years to pay off and pay 1.5% amortization. As you see, you pay significantly more interest than amortization (at least the first 10 years). Assuming the interest rate over the full 40 years, you pay €220,000 interest alone!!!! Are you still sure that is cheaper than paying rent? You can’t make the math look better for yourself. If we now take a rate comparable to €1400 rent, about €1100 (which is still optimistic since €300 ancillary costs are rather low), then it would take 55 years of repayment with €310,000 interest. It just doesn’t add up.

4.) You need reserves for a house. Even with a 40-year financing, you are then at about €1300 amortization + €300-500 ancillary costs (depending on the condition of the house) + about €150-200 reserves. That adds up to a total of €1750-2000. This still does not include a buffer.

5.) Your 110% financing will probably be very expensive. There are only a few banks interested in that at all. That means they will either not take you or only for a lot of pain money. At the beginning of our talks, we planned a 100% financing or slightly less. Even there, many banks dropped out, the interest rates were bad, and scenarios with private loans, etc. were calculated. The advantage for us was that we could demonstrate a significantly higher income than you, so we only had to worry about too little equity and the creditworthiness was very good. For you, not every bank will see it that way; conservative banks will even see the creditworthiness at risk. From my perspective, most will try to cover purchase incidental costs through private loans. These, however, have significantly higher interest rates (because there is no security) and currently range between 4-10%. For terms usually of 10 years, 10% of the loan means monthly payments of €400-500. Besides the interest on the main loan, there is almost nothing left for amortization so that after 10 years nearly 90% residual debt remains.

6.) Last but not least, a house also means a lot of work. That means especially when moving in, all the renovation work begins. Do you have the time, experience, and workforce for that? This brings point 2 back into play: a 2-room apartment is something different than a house!

As you see, it simply doesn’t fit. The idea that you “save the rent” is nice, but you then pay that monthly in interest. Everything the landlord is currently responsible for (damage to the house, repairs, upkeep) you have to take care of yourself.

If you absolutely must own property, you should try to hold out a little longer and save for the purchase incidental costs. Otherwise, you will pay for those twice through the high interest rates. Then I would possibly look for a condominium. Those are cheaper, also cheaper in ancillary costs, and usually can be resold quite reasonably in a good location if you want to move into your own house later anyway. Maintenance costs are usually lower because the big items are shared among all owners and thus renewal of the roof or heating is significantly cheaper.

Finally, a few calculation examples:
To get to a (still quite expensive) 100% financing, you need 13% equity when buying through a broker and 7% without a broker (broker: 5.95%, notary: 2%, property transfer tax: 5% (depending on the federal state)).
That results in...
... €400,000 loan - with broker: €51,800 - without broker: €28,000
... €300,000 loan - with broker: €38,850 - without broker: €21,000
... €200,000 loan - with broker: €25,900 - without broker: €14,000

Regarding the rate, I would advise you never to go below 2% amortization and to aim for 3% if possible. If we now assume a rate of €1100 at 2.3% interest (I don’t think you can do more), then that results in...
... 2% amortization: €310,000 loan amount with a 34-year term
... 3% amortization: €250,000 loan amount with a 25-year term