ᐅ Is Buying a House a Wise Decision in the Current Market Situation?
Created on: 23 Sep 2020 14:32
A
Alibert87
Good day and hello everyone,
Some time ago, I joined this forum to gather information and read experience reports.
I would like to get your neutral opinion on whether buying property at this time would be advisable. We currently rent in a "very good location" and would like to purchase a home here. Many properties are sold "off-market" or only available at very high prices (I’m talking well over 500,000). There is no land available for development; if there is, a property is demolished and rebuilt. I want to gather some input on whether this whole situation is crazy or if such a project is feasible.
Since we don’t have a specific property in view yet but have been monitoring the market for about 1.5 years and have already done quite a few viewings, I assume the median price for homes or condominiums that suit us would be around 600,000.
He, 33 years old, permanently employed in the public sector, net income 2,600 euros (plus 14 monthly payments plus bonus, around 5,000) – from 2021 about 3,000 net (fixed)
She, 32 years old, permanently employed part-time, 25 hours per week, net income 2,300 (plus additional payments around 2,000)
1 child (child benefit) – possibly a second child within the next 3–5 years
Married, tax class 4
Equity around 110,000 (plus 30,000 as a buffer)
Regarding equity, I have a question: Are bank conditions tiered, so that having, for example, 10,000 more in equity results in a better loan offer (how does this tiering work)?
We are really torn whether or not to take this step. It feels very surreal to spend so much money on housing.
I am grateful for any advice
Regards
Some time ago, I joined this forum to gather information and read experience reports.
I would like to get your neutral opinion on whether buying property at this time would be advisable. We currently rent in a "very good location" and would like to purchase a home here. Many properties are sold "off-market" or only available at very high prices (I’m talking well over 500,000). There is no land available for development; if there is, a property is demolished and rebuilt. I want to gather some input on whether this whole situation is crazy or if such a project is feasible.
Since we don’t have a specific property in view yet but have been monitoring the market for about 1.5 years and have already done quite a few viewings, I assume the median price for homes or condominiums that suit us would be around 600,000.
He, 33 years old, permanently employed in the public sector, net income 2,600 euros (plus 14 monthly payments plus bonus, around 5,000) – from 2021 about 3,000 net (fixed)
She, 32 years old, permanently employed part-time, 25 hours per week, net income 2,300 (plus additional payments around 2,000)
1 child (child benefit) – possibly a second child within the next 3–5 years
Married, tax class 4
Equity around 110,000 (plus 30,000 as a buffer)
Regarding equity, I have a question: Are bank conditions tiered, so that having, for example, 10,000 more in equity results in a better loan offer (how does this tiering work)?
We are really torn whether or not to take this step. It feels very surreal to spend so much money on housing.
I am grateful for any advice
Regards
A
Alibert8724 Sep 2020 11:16Hausbautraum20 schrieb:
What is your current rent excluding utilities?We are currently paying "only" 1100 euros. So, there would definitely be a jump (such a payment would certainly be possible). But whether you feel comfortable with it is another matter.
With the mentioned amount of around 600,000 euros and the equity, is a monthly payment under 2,000 euros reasonable or achievable (for example, considering loan term or extra repayments)?
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Alessandro24 Sep 2020 11:22Well, you also have a corresponding value for it.
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Hausbautraum2024 Sep 2020 11:55Alibert87 schrieb:
We are currently paying "only" 1100 euros. So an increase would definitely be expected (such a payment would certainly be possible). But whether you feel comfortable with it is another question.
With the mentioned sum of around 600,000 euros and the equity, is it reasonable or feasible to have a payment under 2000 euros? (For example, considering loan term or extra repayments?) From a calculation perspective, a 520,000-euro loan at 1% interest with payments of 1600 euros would be enough until retirement. You will have to discuss this individually with your banks, though. One bank wanted to offer us a payment of 1500 euros so we could manage it comfortably. But that would have meant paying off the loan over 37 years. That bank was reluctant to accept a higher payment, and higher extra repayments would have increased the interest cost. Our other bank had no problem with a payment of 1800 euros, so we hope to have our 520,000-euro loan paid off in 28 years. With planned extra repayments, it might even be much earlier.
With a loan of 520,000 euros, the monthly payment is just under 1,800 euros. The initial repayment rate is around 2.8%. The fixed interest period is 20 years. However, we also plan to make additional repayments, which we intend to cover with our bonuses, starting at about the fourth year in the house. Without extra repayments, the loan term would be around 30 years. You just need to consider when you want to finish paying off the loan and how much you can afford to pay each month. Staying below 2,000 euros per month is certainly possible, but without additional repayments, the loan term will then be quite long.
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Alibert8724 Sep 2020 13:09Hausbautraum20 schrieb:
According to my calculations, a loan of 520,000 euros with 1% interest would mean a monthly payment of 1,600 euros until retirement.
However, you will need to discuss this individually with your banks.
One bank offered us a monthly payment of 1,500 euros to make it manageable. But that would have meant paying off the loan over 37 years.
This bank was reluctant to accept a higher monthly payment, and making larger extra repayments would have increased the interest rate.
Our other bank had no problem with a monthly payment of 1,800 euros, so we expect to pay off our 520,000-euro loan in about 28 years. With planned extra repayments, possibly significantly sooner. Did you have a period with financial cutbacks, such as parental leave or reduced working hours? Because maintaining 1,800 euros per month seems quite challenging (from my current perspective).
Alibert87 schrieb:
Did you experience any periods with financial cutbacks? Like parental allowance or part-time work? Because sustaining 1800 euros permanently is quite challenging (from my current perspective)The loan amount is simply high. If you have a monthly payment of around 1600 euros (about 1800 USD) over a long term, you need to save money for times such as parental leave. If that’s not possible, then the monthly payment is definitely too high.