Hello everyone,
I am married and have a one-year-old son.
My wife and I are both 30 years old.
We come from the area south of Baden-Württemberg – around Freiburg.
Both of us have above-average incomes.
My wife is currently on parental leave.
We finally acquired a plot of land three months ago through a private sale at a reasonable price.
[300m2 (3200 sq ft) for about 125,000 Euros including additional costs].
Now we have gathered several offers from prefabricated house suppliers, both solid construction and timber frame, etc.
When we calculated everything, the total cost of the entire building project—without the land, including additional costs, exterior works, kitchen, etc.—comes to about 600,000 Euros, truly turnkey, with a buffer included.
Here is the problem.
With the current interest rate, despite owning the land outright [equity], we cannot finance it.
The monthly burden is too high (around 2300–2500 Euros, including an L-Bank loan, which is currently basically in limbo with the state bank).
My idea is to buy a condominium first.
(Secure the land, fully paid (125,000 Euros)).
Our current apartment is too small for the long term.
Financing a condominium would be much easier since the loan amount is significantly lower than for building a house.
We will definitely inherit something in the coming years (the older generation has not yet passed anything on in advance, unfortunately, when it was needed).
My plan would be to buy and live in the condo, paying it off monthly.
Once the inheritance comes through, fully pay off the condo and then build the house. That way, we have the security of owning a paid-off condo and monthly rental income to support the repayment of the house loan.
What do you think? Do you have other ideas?
Regards,
Peter
I am married and have a one-year-old son.
My wife and I are both 30 years old.
We come from the area south of Baden-Württemberg – around Freiburg.
Both of us have above-average incomes.
My wife is currently on parental leave.
We finally acquired a plot of land three months ago through a private sale at a reasonable price.
[300m2 (3200 sq ft) for about 125,000 Euros including additional costs].
Now we have gathered several offers from prefabricated house suppliers, both solid construction and timber frame, etc.
When we calculated everything, the total cost of the entire building project—without the land, including additional costs, exterior works, kitchen, etc.—comes to about 600,000 Euros, truly turnkey, with a buffer included.
Here is the problem.
With the current interest rate, despite owning the land outright [equity], we cannot finance it.
The monthly burden is too high (around 2300–2500 Euros, including an L-Bank loan, which is currently basically in limbo with the state bank).
My idea is to buy a condominium first.
(Secure the land, fully paid (125,000 Euros)).
Our current apartment is too small for the long term.
Financing a condominium would be much easier since the loan amount is significantly lower than for building a house.
We will definitely inherit something in the coming years (the older generation has not yet passed anything on in advance, unfortunately, when it was needed).
My plan would be to buy and live in the condo, paying it off monthly.
Once the inheritance comes through, fully pay off the condo and then build the house. That way, we have the security of owning a paid-off condo and monthly rental income to support the repayment of the house loan.
What do you think? Do you have other ideas?
Regards,
Peter
H
hanghaus202310 Jan 2023 10:09I’m reading about above-average income here. But then there’s complaining about the loan amount.
Building without a basement and garage. Then the monthly payment will be very similar to that of a rental property.
Building without a basement and garage. Then the monthly payment will be very similar to that of a rental property.
The situation is actually quite clear. The original poster has a project with an estimated loan amount of €600,000.
At 4% interest and 1% repayment over a 40-year term, that results in a monthly payment of €2,500. This payment is 48% of a household income of €5,200 (I assume this income comes from both working full-time). A €2,500 monthly payment, as the poster has already mentioned, is unrealistic and no bank would approve it.
Even if the project is reduced by €100,000, the monthly payment is still around €2,100. In my opinion, the payment should be closer to about €1,750 to have a reasonably sound financing. That would correspond to approximately €420,000 per person—which might be sufficient for a very simple, small house in some cases.
So: drastically lowering expectations seems to me to be the only option if this is to be carried through.
At 4% interest and 1% repayment over a 40-year term, that results in a monthly payment of €2,500. This payment is 48% of a household income of €5,200 (I assume this income comes from both working full-time). A €2,500 monthly payment, as the poster has already mentioned, is unrealistic and no bank would approve it.
Even if the project is reduced by €100,000, the monthly payment is still around €2,100. In my opinion, the payment should be closer to about €1,750 to have a reasonably sound financing. That would correspond to approximately €420,000 per person—which might be sufficient for a very simple, small house in some cases.
So: drastically lowering expectations seems to me to be the only option if this is to be carried through.
Finch039 schrieb:
The situation is actually quite clear. The OP has a project with an estimated loan amount of 600,000 €.
At 4% interest and 1% repayment, that results in a monthly payment of €2,500 with a loan term of 40 years. The payment is 48% of a €5,200 household income (I assume €5,200 is earned by both working full-time).
As the OP has already mentioned, a €2,500 monthly payment is unrealistic and no bank would approve it.
Even if the project is reduced by €100,000, the monthly payment would still be about €2,100.
I think the payment should be around €1,750 to have a reasonably healthy financing plan.
That corresponds roughly to a loan of €420,000, which might still be enough for a very simple, small house.
So, in my view, significantly lowering expectations seems to be the only option if you want to proceed. We came to a similar idea about what a healthy payment looks like, despite a somewhat higher income. I don’t think I would push it much further. I’m not a fan of the “percentage of net household income” method, but you just have to trust your gut feeling on this. I would also feel uncomfortable with a €2,500 payment. It can quickly become a real problem if something unexpected happens.
What’s more, I’m not too comfortable with the “native” loan term we chose. Our loan is fixed for 20 years, and we plan to use monthly savings contributions—which currently still fit into our budget—to invest the money in the market. Ideally, at the end of the fixed interest period, we could pay off the remaining balance in full or, more realistically, significantly reduce it so we don’t have to repay the house for more than 30 years.
I’m seeing a great example with my sister right now. She’s in her mid-50s, the house is mostly paid off, and she has drastically cut down her working hours to enjoy her garden and hobbies. Money isn’t everything in life. 😉
Our compromise wasn’t so much the size of the house but the location. We moved to a very rural area where land is still quite affordable. If you want to live closer to or inside a big city—I can fully understand that; we just uprooted our lives recently because we wanted to live exactly HERE—then you have to make compromises elsewhere. But you probably won’t be able to afford the “all-in-one” dream house (a basement, two floors, and garage in a great location).
W
WilderSueden10 Jan 2023 11:06Finch039 schrieb:
At 4% interest and 1% repayment, the monthly installment is 2,500 € for a 40-year term. The original poster is considering a Z15 loan, which is a promotional loan from L-Bank, interest-free for 15 years and fixed at 2.25% repayment. You can expect around 200,000 €, which translates to about 500 €/month. If the second loan comes in at around 300,000 €, there is some room to finance with a 2,000 € monthly payment. Not much, but just enough. At 600,000 €, the option is closed.
Tassimat schrieb:
€200,000 - 2.25% interest: €413
€400,000 - 4% interest, 1% repayment: €1,666.66
Without the garage, the second loan is slightly lower and the total monthly payment is under €2,000.
That should be manageable with this income. I don’t quite understand that. There are financing threads with higher incomes and lower monthly payments that are judged much more critically.
You have to assume that part of the second income, at least about 40%, will initially be lost.
There is also another child planned, so probably a second parental leave.
With the partner working part-time, we would be looking at about €4,400 (approximately $4,750) household income. Then financing with a €2,000 (about $2,150) monthly payment?