Hello everyone,
Since I started exploring the topic of house construction two months ago, I have now registered on this forum.
A brief introduction about me and my wife: We are both employed (civil engineer and real estate assistant) with a net income of 4xxx.
Equity capital: 50,000 euros.
One would actually assume that with this equity and net income, buying a property should be easy. However, since I do not want to repay a loan over 30-35 years but rather a maximum of 25 years, and I don’t want to fully stretch the limit, the monthly installment and therefore the total amount quickly become restricted. A total of 250,000 net plus additional construction costs equivalent to the equity capital would be the limit here. In Berlin and its surrounding area? Practically unthinkable.
I am a civil engineer (although specializing in concrete repair and thus not an expert in single-family houses, etc.) and can therefore assess construction prices, combined with my wife’s interest in the real estate sector, allowing us to understand the high general prices for land.
With 250,000 net plus additional construction costs, there is generally not much you can do nationwide for new builds — this is my initial assessment.
There has already been a lot of discussion here in other threads about construction costs, potential capital, and what is needed. When I see bargain houses on TV, I also facepalm. My assumption is that such homes don’t bring much joy. Heating systems, plumbing, electrical installations, thermal insulation — these are often overestimated.
Currently, I am researching prefabricated houses with self-finishing options. However, I do have some concerns, even though I assume that nowadays the materials at least meet certain standards.
So, what are the options?
Being bound for 30 years and pushing the loan to the limit?
House auctions?
Hoping for a bargain plot including an affordable prefab house as a self-build (lots of work and potentially many worries)
Since I plan to start building within the next 24-36 months, my initial findings are sobering.
At least the construction company I work for could provide the foundation slab plus groundwork like drainage, etc., at a low cost. I also know structural engineers and others involved. Maybe the project can be realized with a “small” budget thanks to these circumstances.
Has anyone managed to do this before?
Since I started exploring the topic of house construction two months ago, I have now registered on this forum.
A brief introduction about me and my wife: We are both employed (civil engineer and real estate assistant) with a net income of 4xxx.
Equity capital: 50,000 euros.
One would actually assume that with this equity and net income, buying a property should be easy. However, since I do not want to repay a loan over 30-35 years but rather a maximum of 25 years, and I don’t want to fully stretch the limit, the monthly installment and therefore the total amount quickly become restricted. A total of 250,000 net plus additional construction costs equivalent to the equity capital would be the limit here. In Berlin and its surrounding area? Practically unthinkable.
I am a civil engineer (although specializing in concrete repair and thus not an expert in single-family houses, etc.) and can therefore assess construction prices, combined with my wife’s interest in the real estate sector, allowing us to understand the high general prices for land.
With 250,000 net plus additional construction costs, there is generally not much you can do nationwide for new builds — this is my initial assessment.
There has already been a lot of discussion here in other threads about construction costs, potential capital, and what is needed. When I see bargain houses on TV, I also facepalm. My assumption is that such homes don’t bring much joy. Heating systems, plumbing, electrical installations, thermal insulation — these are often overestimated.
Currently, I am researching prefabricated houses with self-finishing options. However, I do have some concerns, even though I assume that nowadays the materials at least meet certain standards.
So, what are the options?
Being bound for 30 years and pushing the loan to the limit?
House auctions?
Hoping for a bargain plot including an affordable prefab house as a self-build (lots of work and potentially many worries)
Since I plan to start building within the next 24-36 months, my initial findings are sobering.
At least the construction company I work for could provide the foundation slab plus groundwork like drainage, etc., at a low cost. I also know structural engineers and others involved. Maybe the project can be realized with a “small” budget thanks to these circumstances.
Has anyone managed to do this before?
I’ve now read through the entire thread… Some of it is pretty tough to take.
But what annoys me the most is the argument that by taking out a loan, you’re basically at the mercy of the bank. What?
I’ve signed a contract with the bank that clearly defines all rights and obligations.
My main obligation is to make payments on time; otherwise, sooner or later, the bank will exercise one of its rights.
So what? Do you think a landlord won’t take action if you fail to pay rent?
That’s the whole basis of the contract: I borrow money to build a house. In return, the bank gets the money back from me bit by bit, plus interest reflecting their risk that I might eventually be unable or unwilling to pay.
The bank can’t force me to pay more because of renovations or local rent increases, nor can it just terminate the contract citing “personal use” of the property.
So where exactly am I worse off dealing with a bank than with a landlord?
Everyone can decide for themselves if they’d rather be “at the mercy” of a landlord or a bank. For my part, I chose the bank immediately and don’t regret it for a second.
But what annoys me the most is the argument that by taking out a loan, you’re basically at the mercy of the bank. What?
I’ve signed a contract with the bank that clearly defines all rights and obligations.
My main obligation is to make payments on time; otherwise, sooner or later, the bank will exercise one of its rights.
So what? Do you think a landlord won’t take action if you fail to pay rent?
That’s the whole basis of the contract: I borrow money to build a house. In return, the bank gets the money back from me bit by bit, plus interest reflecting their risk that I might eventually be unable or unwilling to pay.
The bank can’t force me to pay more because of renovations or local rent increases, nor can it just terminate the contract citing “personal use” of the property.
So where exactly am I worse off dealing with a bank than with a landlord?
Everyone can decide for themselves if they’d rather be “at the mercy” of a landlord or a bank. For my part, I chose the bank immediately and don’t regret it for a second.
H
HilfeHilfe15 Jun 2019 11:54matte1987 schrieb:
I’ve now read through the entire thread... some parts were pretty tough reading.
What really bugs me the most is the argument that by taking out a loan, you’re somehow at the mercy of the bank. Huh?
I have a contract with the bank that clearly outlines all rights and obligations.
My main obligation is to make timely payments; otherwise, sooner or later the bank will exercise one of its rights.
So what? Do you think a landlord wouldn’t take action if you don’t pay rent?
That’s what the entire contract is based on: I borrow money to build a house. In return, the bank gets repaid gradually plus interest, which reflects their risk that I might eventually be unable or unwilling to pay.
The bank can’t force me to pay more because of renovations or changes in the rental market, nor can they simply terminate the loan because they want to use the property themselves.
So where exactly am I more at the bank’s mercy than at the mercy of a landlord?
Everyone can decide for themselves whether they’d rather be subject to a landlord or a bank. For me, I chose the bank immediately and haven’t regretted it for a second. You put yourself at risk if you borrow beyond your means and choose loan terms as long as 30 years. Renting offers more flexibility in that regard.
Well, discussing this is an endless loop. Everyone has their own standpoint, which they rightly defend.
But I know too many people who, often due to divorce, end up paying half the mortgage, plus rent for a new one-bedroom apartment, and also have to pay alimony.
You simply can’t predict what will happen over the next 30 years. You can quickly ruin your life with such huge commitments.
And sorry for pushing again, but with a loan of 400,000 euros and a repayment rate of 2.5% plus an interest rate of 1.95%, I calculate at least 110,000 euros in interest paid to the bank. Just for that amount of money, you have to work for a long time and could easily rent for 10 years.
Our current rent excluding utilities is 875 euros. It’s a newly built, high-quality apartment with 102 m² (1,096 sq ft). So I don’t have to think long about what I would choose.
As for security in old age, most people sell their house when the children leave because no one wants to live in the converted attic of the parents, and the children are usually scattered across the world for work and managing their own lives. For two older people, a house is usually too big and too much work.
It used to be different; multi-generational houses were the norm. I think that’s great: grandparents on the bottom floor, parents in the middle, and children on top. Wonderful. Everyone helps and supports each other.
Nowadays, a house is mostly a status symbol that eventually becomes a burden. 200 m² (2,150 sq ft) for the parents and one child (who will eventually move out), plus a huge garden.
If you have the money, cool.
If not, it’s better to leave it alone—nothing lasts forever.
But I know too many people who, often due to divorce, end up paying half the mortgage, plus rent for a new one-bedroom apartment, and also have to pay alimony.
You simply can’t predict what will happen over the next 30 years. You can quickly ruin your life with such huge commitments.
And sorry for pushing again, but with a loan of 400,000 euros and a repayment rate of 2.5% plus an interest rate of 1.95%, I calculate at least 110,000 euros in interest paid to the bank. Just for that amount of money, you have to work for a long time and could easily rent for 10 years.
Our current rent excluding utilities is 875 euros. It’s a newly built, high-quality apartment with 102 m² (1,096 sq ft). So I don’t have to think long about what I would choose.
As for security in old age, most people sell their house when the children leave because no one wants to live in the converted attic of the parents, and the children are usually scattered across the world for work and managing their own lives. For two older people, a house is usually too big and too much work.
It used to be different; multi-generational houses were the norm. I think that’s great: grandparents on the bottom floor, parents in the middle, and children on top. Wonderful. Everyone helps and supports each other.
Nowadays, a house is mostly a status symbol that eventually becomes a burden. 200 m² (2,150 sq ft) for the parents and one child (who will eventually move out), plus a huge garden.
If you have the money, cool.
If not, it’s better to leave it alone—nothing lasts forever.
N
nordanney15 Jun 2019 12:07Bardamu schrieb:
With a repayment rate of 2.5% and an interest rate of 1.95%, I end up paying at least 110,000 euros in interest to the bank. The correct calculation is around 75,000 euros in interest, not 110,000. In addition, as the owner, you have contributed almost 110,000 euros in principal payments.
During the same period, you pay 105,000 euros in rent excluding utilities (gross rent), which is more than the interest portion of your mortgage as an owner. Are you also saving the same amount separately?
For the extra 30,000 euros you pay (without rent increases), I, as the owner, easily take a vacation every year.
I’m not sure if I’m just too slow to understand this calculation.
Why is it that as a property owner you have generated 110,000 euros in savings, while the tenant has not? Is that money actually in your account, or is it another hypothetical amount created by inflation and low interest rates?
And why should an owner save more than a tenant? That all depends on the monthly savings rate deducted from the salary, or am I mistaken? And that, in turn, depends on the income and the saver’s willingness to save. I’m not interested in hypothetical or theoretical savings.
When I enter these numbers into an interest calculator, I get:
Interest paid after 29.5 years: 127,000 euros
But I’m happy to be corrected.
You can set that 30,000 aside for maintenance and renovation.
A house is not an investment, it’s a money pit.
That’s not even close.
I’ll be honest with you: just to cover house costs and interest, I could easily rent for 40 to 50 years in our area (800–900 euros cold rent), without having to restrict myself, and still save money for a luxury motorhome, then just drop dead without stress, no work, and having been master of my time and money all my life.
Why is it that as a property owner you have generated 110,000 euros in savings, while the tenant has not? Is that money actually in your account, or is it another hypothetical amount created by inflation and low interest rates?
And why should an owner save more than a tenant? That all depends on the monthly savings rate deducted from the salary, or am I mistaken? And that, in turn, depends on the income and the saver’s willingness to save. I’m not interested in hypothetical or theoretical savings.
nordanney schrieb:
Correctly calculated, the interest is about 75,000 euros, not 110,000 euros. In addition, you as the owner have generated almost 110,000 euros in savings.
When I enter these numbers into an interest calculator, I get:
Interest paid after 29.5 years: 127,000 euros
But I’m happy to be corrected.
nordanney schrieb:
For the 30,000 euros you pay more (without rent increase), I as the owner easily take a vacation every year.
You can set that 30,000 aside for maintenance and renovation.
A house is not an investment, it’s a money pit.
nordanney schrieb:
In the same time, you pay 105,000 euros in cold rent—which is more than you pay as an owner in interest. Are you also saving the same additional amount?
That’s not even close.
I’ll be honest with you: just to cover house costs and interest, I could easily rent for 40 to 50 years in our area (800–900 euros cold rent), without having to restrict myself, and still save money for a luxury motorhome, then just drop dead without stress, no work, and having been master of my time and money all my life.
Bardamu schrieb:
I don’t know if I’m just too stupid to understand this calculation. You mixed up loan terms in your previous post. Nordanny’s calculation is based on a loan term of 10 years. Bardamu schrieb:
Why has an owner accumulated 110k euros in savings, but the tenant has not? Because the owner amortized at 2.5%! Bardamu schrieb:
And why should an owner save more than a tenant? Because as a tenant you more or less pay about 1% amortization of the landlord’s mortgage, which is then no longer available for your own savings. Additionally, the interest costs decrease month by month and are converted into principal repayment. This is the principle of an annuity loan. Bardamu schrieb:
When I enter these numbers into an interest calculator, I get: Interest paid after 29.5 years: 127k euros Exactly, 127k for 30 years of living there. But in your other post you could only afford 10 years with that money. Bardamu schrieb:
Honestly, just for house costs and interest, I could easily rent for 40 to 50 years in our area (800–900 rent excluding utilities) 1.95% of 400k euros is 650€ per month in the FIRST month. Every following month you pay less than 650€. This is the principle of an annuity loan. For comparison: 850€ * 12 months * 29.5 years = 300,900€. Compared to the interest paid above: 127,000€ in interest.
Bardamu schrieb:
[…] renting […] I don’t have to make sacrifices and can even save money for a luxury camper van, then drop dead without any stress, no work, and having been in control of my time and money my whole life. Correct. But for that flexibility you pay money (300,900€ - 127,000€) and at the end of the term you have no house. Even if it deteriorates, after 30 years it’s worth more than your rented apartment. Your landlord also won’t renovate your rental while you live there.