Good evening everyone,
we registered in the forum today and are just starting our house building plans. We live in Bremen and want to build in the surrounding area.
Today, we had an appointment with an independent financial advisor who also financed my brother’s house and previously my parents’ house. I have just finished my studies, and we now have a total net income of about 3650 € (approximately $3850). We are both 29 years old – I completed vocational training and gained work experience before my studies.
I was mainly there because I am, of course, aware of the unusual interest rate situation and wanted to ask whether we should save to build equity or rather take advantage of the low interest rates. The answer was clear in this case: with 20,000 € (about $21,000) in equity, we can easily get a construction loan for 220,000 € (around $231,000). The interest rate situation is exceptionally favorable. The portion from the KfW loan would be 100,000 € (about $105,000). The effective interest rate for both loans combined would be 2.79%. The KfW loan would be repaid at 4.35%, and the bank loan (120,000 € / $126,000) initially only at 1%. The fixed-rate period is 10 years at first.
The monthly payment would be 958.31 € (approximately $1005).
This seems manageable monthly and exceptionally affordable to me.
Of course, the conversation was just for information, as all further steps (house type, construction company, land plot, etc.) still have to be reviewed and clarified to determine the actual financing needs.
My question is simply whether we actually received a good (non-binding) offer and whether you also think it makes sense in our situation to start building sooner rather than later, despite the low equity share?
Thank you very much.
we registered in the forum today and are just starting our house building plans. We live in Bremen and want to build in the surrounding area.
Today, we had an appointment with an independent financial advisor who also financed my brother’s house and previously my parents’ house. I have just finished my studies, and we now have a total net income of about 3650 € (approximately $3850). We are both 29 years old – I completed vocational training and gained work experience before my studies.
I was mainly there because I am, of course, aware of the unusual interest rate situation and wanted to ask whether we should save to build equity or rather take advantage of the low interest rates. The answer was clear in this case: with 20,000 € (about $21,000) in equity, we can easily get a construction loan for 220,000 € (around $231,000). The interest rate situation is exceptionally favorable. The portion from the KfW loan would be 100,000 € (about $105,000). The effective interest rate for both loans combined would be 2.79%. The KfW loan would be repaid at 4.35%, and the bank loan (120,000 € / $126,000) initially only at 1%. The fixed-rate period is 10 years at first.
The monthly payment would be 958.31 € (approximately $1005).
This seems manageable monthly and exceptionally affordable to me.
Of course, the conversation was just for information, as all further steps (house type, construction company, land plot, etc.) still have to be reviewed and clarified to determine the actual financing needs.
My question is simply whether we actually received a good (non-binding) offer and whether you also think it makes sense in our situation to start building sooner rather than later, despite the low equity share?
Thank you very much.
B
Bauexperte11 May 2012 23:08Hello,
Plot €58,000
minus promised financing €220,000
leaves €162,000 – from which another €35,000 for typical additional building costs equals €127,000 for the planned new build.
If you’re talking about a finished shell stage, then the home construction can work; everything else belongs in the realm of dreams... even in the surroundings of Bremen 🙄
Best regards
Sheva schrieb:Sometimes I really wonder what kind of reality I am waking up in...
Just to inform, I just spoke again with our friends: Plot 1100 m2 (0.27 acres) – €58,000 including additional costs
... The answer was very clear in this case: with €20,000 equity, we can easily get a home construction loan of €220,000...
Plot €58,000
minus promised financing €220,000
leaves €162,000 – from which another €35,000 for typical additional building costs equals €127,000 for the planned new build.
If you’re talking about a finished shell stage, then the home construction can work; everything else belongs in the realm of dreams... even in the surroundings of Bremen 🙄
Best regards
Thanks for the replies – maybe it was misunderstood, our friends built in those size ranges, but we decided against that after the first response here in the forum 😉
Over the next few days, we will first talk to different developers, visit plots of land, etc., to get an idea of the price range our house will be in, including additional costs and a buffer. We have a small advantage: our father-in-law will build both bathrooms, including materials, as he works as an engineer for a large sanitary supplier.
As of today, I think we will save a minimum of €55,000 (€55,000) as equity, which we should be able to manage relatively quickly with support from our parents.
If there is interest, I will gladly share updates on what we learn from these discussions and where we actually end up price-wise.
Over the next few days, we will first talk to different developers, visit plots of land, etc., to get an idea of the price range our house will be in, including additional costs and a buffer. We have a small advantage: our father-in-law will build both bathrooms, including materials, as he works as an engineer for a large sanitary supplier.
As of today, I think we will save a minimum of €55,000 (€55,000) as equity, which we should be able to manage relatively quickly with support from our parents.
If there is interest, I will gladly share updates on what we learn from these discussions and where we actually end up price-wise.
Marit schrieb:
We decided against making extra repayments because you’ll never get debt as cheap as now, so why make extra payments? That is unfortunately completely wrong. The lower the interest rates, the faster you should repay your loan—that means making higher repayments. The statement above only applies if you’re using the loan to generate capital, like with a photovoltaic system. But otherwise, interest is interest, and it compounds over time. The longer you keep the debt, the more the house will ultimately cost. Low interest rates give you the opportunity to repay the loan faster since you can repay 3% instead of 2% with the same monthly amount.
If there is interest, I will of course be happy to post updates from the discussions and where we actually end up price-wise at the end. Definitely looking forward to that 🙂
@DerDa
I don’t think my attitude towards extra repayments is completely wrong, otherwise we wouldn’t be doing it. ;-)
We have simply decided that if we have leftover money, we put it into our building savings contract. It’s not like we would spend it otherwise. And since the interest rates are so low, I don’t mind paying them. The risk of higher interest later is minimal because our remaining loans after the fixed-rate period will be low. So we won’t have any problems down the line.
Just as an aside:
Right now, I put all my savings into paying down the loans, but there might come a time when finances get tight. Do you think the bank cares if you made regular extra repayments in the previous years? No, they don’t care...
Also, at 27 years old, we are still relatively young, so repaying the loan over the next 30 years doesn’t bother us.
I don’t think my attitude towards extra repayments is completely wrong, otherwise we wouldn’t be doing it. ;-)
We have simply decided that if we have leftover money, we put it into our building savings contract. It’s not like we would spend it otherwise. And since the interest rates are so low, I don’t mind paying them. The risk of higher interest later is minimal because our remaining loans after the fixed-rate period will be low. So we won’t have any problems down the line.
Just as an aside:
Right now, I put all my savings into paying down the loans, but there might come a time when finances get tight. Do you think the bank cares if you made regular extra repayments in the previous years? No, they don’t care...
Also, at 27 years old, we are still relatively young, so repaying the loan over the next 30 years doesn’t bother us.
P
perlenmann14 May 2012 08:24But you’re probably making a mistake in your thinking.
You’re likely paying around 3% interest on your loan and then putting the extra money into a building savings plan offering maybe 1% interest?
It would be better to keep it in a high-yield savings account at about 2.7% as a buffer for whatever you may need!
I’m no financial expert, but I think you might have the wrong approach there.
You’re likely paying around 3% interest on your loan and then putting the extra money into a building savings plan offering maybe 1% interest?
It would be better to keep it in a high-yield savings account at about 2.7% as a buffer for whatever you may need!
I’m no financial expert, but I think you might have the wrong approach there.