ᐅ Own Property from the Start? A Beginner Needs Straight Talk...
Created on: 20 Aug 2016 18:35
T
Titus72
Hello everyone,
I’m new to this forum and just want to say a friendly HELLO to all.
I already have a fundamental question: Does my dream of owning a home fit into reality from the start? I feel like I haven’t really accepted the price reality yet and am still stuck in the 80s/90s...
But what is this actually about? Well, for years I considered buying a property financially unwise. So, I’m still renting. However, I want to improve my living quality and have been looking for a new apartment for a long time (I live in Braunschweig). And what can I say: I’m frankly shocked by the rent prices in this area. What my wife and I would like doesn’t come under €1200 cold rent, with prices trending higher...
So, like many these days, I started thinking about buying. Naturally, the question arises: what can I afford and what do I want? And here, I think I might still be wearing rose-colored glasses!
About me: male, married, children planned soon
Net income about €5200–5400 (depending on the number of shifts) working 60–70 hours a week
(in the coming years, the salary will increase due to experience and step raises), no bonuses or similar, no Christmas bonus, etc.
My fixed monthly costs are around €3800
This includes a monthly savings rate of €1400
Current warm rent including electricity is €830
Still need to consider monthly living expenses like groceries, etc.
My own equity currently amounts to about €80,000, but it’s tied up and not currently freely available, so let’s say my equity = €0, oops.
Looking at property prices in our region (Braunschweig), I’d have to budget around €350,000–450,000 for an average single-family home. And I always wonder: who can afford this immediately?? I know I’m lucky to be among the higher earners. And when I see on radio, film, or TV the kind of houses some people live in (who earn significantly less than I do), I’m amazed. How do they manage it: great house, nice car, good clothes, etc.?
To be clear: this is not envy, I truly wish everyone well. My question is always: why can’t I afford it? Where am I miscalculating, where is my mental block? Apart from a car loan, I have no debts and don’t live extravagantly...
So, who among you experienced folks can help me see things clearly or take off my rose-colored glasses?
Best regards,
Titus72
I’m new to this forum and just want to say a friendly HELLO to all.
I already have a fundamental question: Does my dream of owning a home fit into reality from the start? I feel like I haven’t really accepted the price reality yet and am still stuck in the 80s/90s...
But what is this actually about? Well, for years I considered buying a property financially unwise. So, I’m still renting. However, I want to improve my living quality and have been looking for a new apartment for a long time (I live in Braunschweig). And what can I say: I’m frankly shocked by the rent prices in this area. What my wife and I would like doesn’t come under €1200 cold rent, with prices trending higher...
So, like many these days, I started thinking about buying. Naturally, the question arises: what can I afford and what do I want? And here, I think I might still be wearing rose-colored glasses!
About me: male, married, children planned soon
Net income about €5200–5400 (depending on the number of shifts) working 60–70 hours a week
(in the coming years, the salary will increase due to experience and step raises), no bonuses or similar, no Christmas bonus, etc.
My fixed monthly costs are around €3800
This includes a monthly savings rate of €1400
Current warm rent including electricity is €830
Still need to consider monthly living expenses like groceries, etc.
My own equity currently amounts to about €80,000, but it’s tied up and not currently freely available, so let’s say my equity = €0, oops.
Looking at property prices in our region (Braunschweig), I’d have to budget around €350,000–450,000 for an average single-family home. And I always wonder: who can afford this immediately?? I know I’m lucky to be among the higher earners. And when I see on radio, film, or TV the kind of houses some people live in (who earn significantly less than I do), I’m amazed. How do they manage it: great house, nice car, good clothes, etc.?
To be clear: this is not envy, I truly wish everyone well. My question is always: why can’t I afford it? Where am I miscalculating, where is my mental block? Apart from a car loan, I have no debts and don’t live extravagantly...
So, who among you experienced folks can help me see things clearly or take off my rose-colored glasses?
Best regards,
Titus72
To return to the original question from the OP:
You might want to take a closer look at your expense side and explain it more clearly. It’s written a bit strangely. Maybe I understood it correctly:
Fixed costs: 2,400 euros
Monthly savings rate: 1,400 euros
Plus rent (including utilities): 830 euros
Living expenses: 570 – 770 euros
Is your wife working? Does she have an income or did you leave her out completely because of the upcoming planned child? Then there might be an additional buffer available (income or parental allowance + future income).
I’ll assume 1,400 euros plus 500 euros cold rent: 1,900 euros per month for the loan payment
1,900 euros × 12 months ÷ 4.5% (assumed annuity) = approx. 500,000 euros potential loan <--- should be feasible
How was the 80,000 euros determined?
Are the 1,400 euros currently fully invested in the specified investment?
Depending on where the 80,000 euros are invested, you can also use this asset as collateral (assignment of an insurance policy, pledge of a securities account, etc.)
Do you have the money in a condominium: mortgage lien on the property
Is the money in a home savings contract that is not yet ready for allocation? Then you can coordinate the loan terms:
70,000 euros for X years (until allocation readiness) + 100,000 euros KfW loan + remaining loan amount (or the allocation readiness is only reached shortly before the KfW loan matures – then repayment can be made with the home savings contract).
Judging by your username, you are 44 years old: Keep in mind with your loan that you should aim to be debt-free in about 20 years so you can retire without debt.
You might want to take a closer look at your expense side and explain it more clearly. It’s written a bit strangely. Maybe I understood it correctly:
Fixed costs: 2,400 euros
Monthly savings rate: 1,400 euros
Plus rent (including utilities): 830 euros
Living expenses: 570 – 770 euros
Is your wife working? Does she have an income or did you leave her out completely because of the upcoming planned child? Then there might be an additional buffer available (income or parental allowance + future income).
I’ll assume 1,400 euros plus 500 euros cold rent: 1,900 euros per month for the loan payment
1,900 euros × 12 months ÷ 4.5% (assumed annuity) = approx. 500,000 euros potential loan <--- should be feasible
How was the 80,000 euros determined?
Are the 1,400 euros currently fully invested in the specified investment?
Depending on where the 80,000 euros are invested, you can also use this asset as collateral (assignment of an insurance policy, pledge of a securities account, etc.)
Do you have the money in a condominium: mortgage lien on the property
Is the money in a home savings contract that is not yet ready for allocation? Then you can coordinate the loan terms:
70,000 euros for X years (until allocation readiness) + 100,000 euros KfW loan + remaining loan amount (or the allocation readiness is only reached shortly before the KfW loan matures – then repayment can be made with the home savings contract).
Judging by your username, you are 44 years old: Keep in mind with your loan that you should aim to be debt-free in about 20 years so you can retire without debt.
S
Steffen8022 Aug 2016 13:26Oh folks... why are you getting so worked up again? Just to remind you, I wrote: "Neither is a 3.2k income very high nor is a 26-year fixed interest period reasonable."
It doesn’t say that "3.2k is bad or average," it says it’s not VERY HIGH. Always in the context of a homebuyer planning to build in 2016. Is anyone seriously going to disagree with that?! I would rather call the 5k+ mentioned by the original poster very good.
And why 26 years is hardly reasonable has already been explained several times in other threads. Of course, it depends on the individual case. If the entire financing is stretched to the limit, then a full repayment loan could certainly make sense... but even that is not the norm. At the moment, terms of around 15, max 20 years, are actually reasonable. I would even call 15 years nearly perfect.
It doesn’t say that "3.2k is bad or average," it says it’s not VERY HIGH. Always in the context of a homebuyer planning to build in 2016. Is anyone seriously going to disagree with that?! I would rather call the 5k+ mentioned by the original poster very good.
And why 26 years is hardly reasonable has already been explained several times in other threads. Of course, it depends on the individual case. If the entire financing is stretched to the limit, then a full repayment loan could certainly make sense... but even that is not the norm. At the moment, terms of around 15, max 20 years, are actually reasonable. I would even call 15 years nearly perfect.
S
Sebastian7922 Aug 2016 13:28Steffen80 schrieb:
. Of course, it depends on the individual case. And you could have saved the rest of the text because it applies to no one and everyone at the same time.
S
Steffen8022 Aug 2016 13:29Sebastian79 schrieb:
And you could have saved the rest of the text, because it applies to no one and everyone at the same time.No, I actually forgot something else -> If you’re cutting it too close, it’s better not to build a house.
S
Sebastian7922 Aug 2016 13:32Steffen's wisdom – earlier in the text, he also mentioned that with a tight financing arrangement, a full repayment mortgage makes sense.
J
j.bautsch22 Aug 2016 13:35and then came "...but that is not the rule either"