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
baristabasti schrieb:
Income has only been consistent for the past 2 years. Due to various circumstances (without impact on financing, etc.), my partner unfortunately is basically starting again with zero equity.As I said, I would especially set a higher savings rate in this case. With a rent of €2,500 (about $2,700) that apparently isn’t really a burden for you currently, I don’t quite understand why there is so much concern about the mortgage payment. Paying such a high rent for two people is something you first have to be willing to do as well.
B
baristabasti20 Jan 2023 20:40fm-united schrieb:
I also think you should just go ahead with it now.
With a calculated 6% capital service per month, you pay the bank 500€ per month for every 100,000€ loan. With a (relatively low) target payment of 2,500€, that means a 500k loan plus your 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 later for things like the kitchen and landscaping.
Could you explain why you want to wait until 2025? What do you hope to gain from waiting? You will still be paying rent, and construction costs probably won’t decrease, at best remain stable.
And in general: Why can’t you save more each month? Hi. Thanks to you as well for the feedback.
The background is, (a) that I currently still have to spend a lot of time in the city for work and (n) from my perspective, the equity is still too low (we are working on it…).
That’s why the idea of splitting and the negotiation result with the bank regarding the plot. The hope (I know…) is that in two years maybe one of the parameters, interest rates or construction costs, will be more “builder-friendly.”
B
Bausparfuchs20 Jan 2023 20:44You have an annual income of 114,000 euros.
Where is the money? Buy the plot of land and pay it off over 5 years. Then it will be fully paid.
The building obligation only means you have to start construction by 2026. You don’t need a loan for the planning and building permit / planning permission application. You can pay for that yourself.
Construction officially begins when you put a shovel in the ground. After the approved building permit / planning permission, you file a notice of construction start.
In principle, you can build over the course of 20 years. So you can plan the house in advance, and once the land is paid off, you can calmly look for a construction company. Then the total financing amount won’t be as high.
Where is the money? Buy the plot of land and pay it off over 5 years. Then it will be fully paid.
The building obligation only means you have to start construction by 2026. You don’t need a loan for the planning and building permit / planning permission application. You can pay for that yourself.
Construction officially begins when you put a shovel in the ground. After the approved building permit / planning permission, you file a notice of construction start.
In principle, you can build over the course of 20 years. So you can plan the house in advance, and once the land is paid off, you can calmly look for a construction company. Then the total financing amount won’t be as high.
B
baristabasti20 Jan 2023 20:55Bausparfuchs schrieb:
You have an annual income of 114,000 euros.
Where is the money? Buy the land and pay it off over five years. Then it will be paid off.
The construction obligation only means you have to start building by 2026. You don’t need a loan for the planning and building permit application. You can pay for those on your own.
Construction officially begins when you put a spade into the ground. After the approved building permit, you file a notification of the start of construction. Then you basically have 20 years to build. So you can plan the house, and once the land is paid off, you can calmly look for a builder. That way, the total financing amount isn’t so high anymore. They were careful with the contract for the land: the shell structure must be standing.
Well, my income has only been like this for the last two years. I had the idea to put all the equity into the land and pay off the rest over three years.
My thinking here was that I secure the 3.7% interest rate today. I start with a high repayment rate. Depending on the interest rate level in two years, I would then modify the financing of the land. So if interest rates rise: reduce the repayment on the land and pay off the house faster, and vice versa.
S
Sunshine38720 Jan 2023 21:09I warn you not to come back to this forum in two years saying, “I should have built two years ago, because now with 6% interest rates and €4000 per m² (about $372 per sq ft) it’s no longer affordable.” Who says it will be better in two years? Construction costs will at best stagnate, but a rapid increase (wage-price spiral) could also follow if inflation continues.
You might say that you just started your job and it might not be secure. But if you lose that job, you would also lose your rental apartment. So be braver: with that income, I wouldn’t hesitate any longer but start right away. And if you want 150 m² (about 1600 sq ft), which I assume, budget at least €450,000 (about $420,000) all in for the house. So start now. It won’t get better…
You might say that you just started your job and it might not be secure. But if you lose that job, you would also lose your rental apartment. So be braver: with that income, I wouldn’t hesitate any longer but start right away. And if you want 150 m² (about 1600 sq ft), which I assume, budget at least €450,000 (about $420,000) all in for the house. So start now. It won’t get better…
SumsumBiene20 Jan 2023 22:23Those are luxury problems.
With that salary, you can easily afford to do everything right away. In two or three years, you will have already spent quite a lot of money on rent again.
With that salary, you can easily afford to do everything right away. In two or three years, you will have already spent quite a lot of money on rent again.