Why is financing so difficult?

Good evening everyone!

We want to build. (Huuuh surprise!)
We have reserved a pretty little plot of 960 sqm, which can be purchased for €123,000 (rounded).
Now, I naïvely thought that financing would not be a problem with our income.

Let me summarize:
Plot: €123,000
Equity capital: €18,000 building savings contract plus additional unknown support from my parents
My salary: €2,900 net (fairly secure job)
His salary: €2,000 net (employee in the public sector, practically unfireable due to hearing impairment)
Current expenses: €3,470
  including €840 rent,
    €651 daycare fees (but these will decrease as the child gets older)
    €606 child support for 2 children from first marriage (13 and 8 years old),
    about €500 loans (all will be paid off in 5 years)
1 child together.
House construction about 160 sqm: €280,000 (we probably won’t get any cheaper than that)

2 banks have already rejected us. Once because of an ongoing loan (which we would refinance), but mainly because of the low equity capital.
Debeka would probably give us a loan, but then we would have repayments of €1,300 per month. I nearly fell off my chair. I had hoped for a maximum of €1,000 and then to put Christmas bonus and other payments into special repayments.

Am I really too naïve or are we doing something wrong?

You want a 400,000 Euro loan and then only a 1000 Euro monthly rate? You will never really finish paying it off with installments like that. With 2% repayment (should be at least that) and about 2.5% interest, you have to roughly calculate around 1500 Euro, plus the usual additional costs (taxes, insurance, heating, water, etc.) as well as savings for future repairs.

2% repayment and the mentioned amount and interest results in a term of just over 32 years. With an annual special payment of 2000 Euro, the term is reduced to just over 27 years.

There are annuity calculators online where you can simply feed this in for rough orientation and thus at least get the general framework.

You apparently have zero equity (18,000 euros is practically nothing, just the real estate transfer tax on a 123,000 euro property in NRW is 8,000 euros plus notary and land registry fees).

And your income is simply not that high ... You are naive.

Are you doing something wrong? You have saved too little equity.

(Whether it was really possible in the past(TM) for an average earner to acquire a home is beyond my knowledge due to lack of personal experience. Today, you definitely need a lot of cash ... By the way, net income will probably decrease rather than increase unless you generate significantly more gross income.)

I am also wondering where your savings are, especially since 4,900 euros is not exactly a small amount. But I read a divorce out of this (usually not free), high ongoing costs, relatively high standard of living, existing loans amounting to 25 TEUR (car or refinancing?)

Over what period did you build up your equity? Actually, you should be able to set aside 60 TEUR in 3 more years easily. Did you only start saving last year? These are the kinds of questions I would ask as a bank.

I can only agree with the previous speakers. Income is okay, expenses are too high. Nearly full financing without equity (where did the salary surplus go?). If with this income you can’t manage even without a loan (for whatever reason) and hardly save any equity, why should a bank lend you so much money? How do you plan to refinance the loan? The house would already be overleveraged beyond its value from the bank’s perspective without refinancing.

P.S. Lower your expectations, 960 sqm plot is sufficient for a hacienda. For a small house (why 160 sqm for three people?) 450 sqm is enough. This will put you into suitable price and financing ranges. Or buy a used, cheaper house and renovate it from ongoing income. That should not be such a big problem in Marl and the surrounding area.

And I already thought our property was too expensive at 90t.