Hello and greetings to everyone!
As a "newcomer" here in the forum (my first step out of anonymous reading, so to speak...), I am curious about your opinions and especially looking forward to your advice.
My partner and I (both 33 years old) currently have the opportunity to purchase a truly (for us) beautiful plot of land. The plot is located in Lower Saxony, Germany (more rural area). My partner is a civil servant and I am an employee.
About the plot:
approximately 1,013 sqm (11,000 sq ft), new development area, around EUR 190,000 plus additional costs.
Obligation to build by mid-2026.
Our financial framework is as follows (net income):
Me: EUR 6,800 per month
Partner: EUR 2,700 per month.
Current equity of EUR 100,000 (mostly in stocks), no debts.
Due to the current situation with high construction costs and high interest rates, we do not want to build right now. Instead, we plan to start construction in the second half of 2025.
After weighing all the (to my knowledge) advantages and disadvantages of financing the land and the house separately, I have currently requested financing for the land and received the following offer:
Net loan of EUR 170,000 at 3.78% nominal interest p.a., fixed for 10 years, with 4% repayment (equity use about EUR 33,000). At the same time, I negotiated with the bank that in 2025 they will subordinate up to an amount X (=> house financing) so that I should have maximum flexibility in choosing the financing partner at that time (if I’m not overlooking anything).
Despite this, which I consider a really good offer, two points are troubling us currently. On the one hand, of course, we are very annoyed that we are apparently 2 years too late for this (that’s the emotional aspect), and on the other hand, we have significant concerns about the overall financing of house and land. I actually see no reason why we should have to pay more than a maximum (!!) of EUR 3,000 per month for repaying the house loan later – I would prefer to keep this amount between EUR 2,500 and EUR 2,800 (wishes...).
Now, of course, I also put some figures into Excel with the following parameters:
Equity in 2025: EUR 120,000 (EUR 65,000 remaining now plus saving rate of EUR 2,500 per month)
Interest rate: 4% p.a. (pure guesswork)
Initial repayment: 2%
My result:
After deducting all these positions, we can actually afford a house for only EUR 355,000? Am I missing something here? Am I making a mistake or is the situation really as unusual as it seems?
Do you maybe have some ideas or tips regarding your approach? We are currently extremely uncertain...
Thanks in advance and have a great start to the weekend!
Basti
As a "newcomer" here in the forum (my first step out of anonymous reading, so to speak...), I am curious about your opinions and especially looking forward to your advice.
My partner and I (both 33 years old) currently have the opportunity to purchase a truly (for us) beautiful plot of land. The plot is located in Lower Saxony, Germany (more rural area). My partner is a civil servant and I am an employee.
About the plot:
approximately 1,013 sqm (11,000 sq ft), new development area, around EUR 190,000 plus additional costs.
Obligation to build by mid-2026.
Our financial framework is as follows (net income):
Me: EUR 6,800 per month
Partner: EUR 2,700 per month.
Current equity of EUR 100,000 (mostly in stocks), no debts.
Due to the current situation with high construction costs and high interest rates, we do not want to build right now. Instead, we plan to start construction in the second half of 2025.
After weighing all the (to my knowledge) advantages and disadvantages of financing the land and the house separately, I have currently requested financing for the land and received the following offer:
Net loan of EUR 170,000 at 3.78% nominal interest p.a., fixed for 10 years, with 4% repayment (equity use about EUR 33,000). At the same time, I negotiated with the bank that in 2025 they will subordinate up to an amount X (=> house financing) so that I should have maximum flexibility in choosing the financing partner at that time (if I’m not overlooking anything).
Despite this, which I consider a really good offer, two points are troubling us currently. On the one hand, of course, we are very annoyed that we are apparently 2 years too late for this (that’s the emotional aspect), and on the other hand, we have significant concerns about the overall financing of house and land. I actually see no reason why we should have to pay more than a maximum (!!) of EUR 3,000 per month for repaying the house loan later – I would prefer to keep this amount between EUR 2,500 and EUR 2,800 (wishes...).
Now, of course, I also put some figures into Excel with the following parameters:
Equity in 2025: EUR 120,000 (EUR 65,000 remaining now plus saving rate of EUR 2,500 per month)
Interest rate: 4% p.a. (pure guesswork)
Initial repayment: 2%
My result:
| EUR 460,000 | Possible total financing (equity plus debt) |
| EUR 10,000 | Buffer |
| EUR 40,000 | Additional costs |
| EUR 20,000 | Kitchen |
| EUR 390,000 | Subtotal |
| EUR 35,000 | Outdoor facilities |
| EUR 355,000 | Construction costs |
After deducting all these positions, we can actually afford a house for only EUR 355,000? Am I missing something here? Am I making a mistake or is the situation really as unusual as it seems?
Do you maybe have some ideas or tips regarding your approach? We are currently extremely uncertain...
Thanks in advance and have a great start to the weekend!
Basti
In general, I wouldn’t worry too much about the income. However, compared to your income, you have relatively little equity—though it’s possible the income has only been at this level for a short time. What doesn’t make sense to me, though, is the concern about a high loan installment combined with a low savings rate of €2,500 (about $2,700). So, either you save a substantial amount and try to reduce the loan installment by putting in as much equity as possible, or you accept the installment you have to pay for the loan. With that income, both options should be manageable.
B
baristabasti20 Jan 2023 20:26Tolentino schrieb:
Where does this number come from? Did you calculate it yourself, or did the bank provide it?
What is the respective age?
Because actually, with this here, there should be a lot more possible, and then the total financing would also allow for a much higher amount. Certainly, a higher payment is possible both mathematically and practically, but we are still planning to have children. So I prefer to calculate with some buffer in the monthly payments and without assuming future salary increases. We’re both 33 years old.
I calculated the 460,000 EUR (about 460,000 USD) based on a flat interest rate of 4% and 2% repayment. Therefore, I always keep the target monthly payment of 2,800 EUR (about 2,800 USD) in mind. From now on, about 1,100 EUR (approximately 1,100 USD) per month would be due for the land. The remaining 1,700 EUR (around 1,700 USD) would then be available for the house financing under the assumed conditions.
Hope that was somewhat clear.
B
baristabasti20 Jan 2023 20:28HnghusBY schrieb:
In general, I wouldn’t worry too much about the income. However, compared to your income, you have relatively little equity – but maybe the income is recent.
What doesn’t make sense to me, though, is the fear of a high loan installment alongside a low savings rate of €2,500 (about $2,700). Either you save significantly and try to reduce the loan installment by using as much equity as possible, or you accept the installment you have to pay for the loan. With your income, both options should be manageable. The income has only been in place for about 2 years. Due to various circumstances (with no impact on financing, etc.), my partner is unfortunately starting almost from zero equity in euros.
F
fm-united20 Jan 2023 20:31I also think you should just go ahead and do it now.
With a calculated 6% interest service per month, you would pay the bank 500€ per month on a 100,000€ loan. With a (fairly low) target monthly payment of 2,500€, that equals a 500,000€ loan, plus your own equity. So, you actually have more money available.
During the construction phase, you will still be able to save equity, which can also be used for subsequent expenses like the kitchen and landscaping.
Could you please explain why you want to wait until 2025? What are you hoping to gain by waiting? You will still be paying rent, and construction costs probably won’t decrease, at best they will remain stable.
And in general: why can’t you set aside more money each month?
With a calculated 6% interest service per month, you would pay the bank 500€ per month on a 100,000€ loan. With a (fairly low) target monthly payment of 2,500€, that equals a 500,000€ loan, plus your own equity. So, you actually have more money available.
During the construction phase, you will still be able to save equity, which can also be used for subsequent expenses like the kitchen and landscaping.
Could you please explain why you want to wait until 2025? What are you hoping to gain by waiting? You will still be paying rent, and construction costs probably won’t decrease, at best they will remain stable.
And in general: why can’t you set aside more money each month?
B
baristabasti20 Jan 2023 20:34SoL schrieb:
Where exactly does the 7,000€ (!) go every month?
Do you have children, and if so, how many? Hi. Sorry, that wasn’t explained very clearly before. I would describe our expenses so far as "normal."
We pay 2,500 EUR for rent including utilities.
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