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.
Well, everyone has to decide that for themselves. If you finance 300,000 euros and repay as much as possible, but after 10 years still have a remaining debt of 150,000 euros, things can get risky if the interest rate rises to 7–9%. Then, with your current monthly payments, you might not even be able to cover the interest anymore.
I can only repeat myself: it's clear that financial security comes at a cost, but what is 500,000 euros over 30 years? And that’s assuming repayment without extra payments, which are currently allowed at 10% per year on the loan amount without any issues.
I’ve shared my opinion, but everyone has to make their own decision… ;-)
I can only repeat myself: it's clear that financial security comes at a cost, but what is 500,000 euros over 30 years? And that’s assuming repayment without extra payments, which are currently allowed at 10% per year on the loan amount without any issues.
I’ve shared my opinion, but everyone has to make their own decision… ;-)
Sure, it’s fine if you’ve chosen your financing that way, but blanket statements like "all loans with outstanding balance aren’t acceptable" aren’t really correct. Everyone should and has to choose the financing option that suits them best. I don’t think everyone would have chosen our financing either, but we are happy with it, and that’s what matters most.
@maeam
That’s why we signed for 20 years 🙂 Long-term security, and if interest rates unexpectedly drop again, the contract can be terminated after 10 years. Committing to 30 years definitely requires careful consideration – I could imagine it might be more practical to use the saved interest payments (with a 20-year term) for extra repayments. May I ask what your effective interest rate is?
@ Der Da: Where exactly did all those costs come from – if you can say that precisely? Because then I would try to include a larger buffer now.
That’s why we signed for 20 years 🙂 Long-term security, and if interest rates unexpectedly drop again, the contract can be terminated after 10 years. Committing to 30 years definitely requires careful consideration – I could imagine it might be more practical to use the saved interest payments (with a 20-year term) for extra repayments. May I ask what your effective interest rate is?
@ Der Da: Where exactly did all those costs come from – if you can say that precisely? Because then I would try to include a larger buffer now.
Where did the costs come from:
15,000 came from changing the floor plan and the additional costs for a room-air-independent fireplace.
7,000 were for a mechanical ventilation system.
12,000 resulted from our house being 40 cm (16 inches) below the required height (gravel fill).
3,000 extra for earthworks, more than originally planned (originally 5,000).
7,000 were added as "unexpected" utility connection costs.
7,500 for the essential exterior work, since no one wants to live under a tarp for years.
2,000 for the chimney sweep because of that ridiculous ladder.
2,000 extra for the removal of excavated soil.
3,000 more for the garage than planned (planned was 8,000).
750 was the higher cost for soil analysis.
700 for a good lawn mower to cut our 600 m² (6,460 sq ft) lawn.
And so on and so forth... I could go on forever.
We haven’t even selected finishes or flooring yet... so it’s definitely not over 😀
We will probably have to dream about the terrace for at least another year 🙂
New furniture is also far down the list... our new house will feel quite empty since we’re moving with hardly any furniture... 🙂
But overall, it will all come together over time. We deliberately kept the loan small so we wouldn’t completely overspend.
Everything just has to come bit by bit. But it’s also nice to have something new to look forward to every year 😀
15,000 came from changing the floor plan and the additional costs for a room-air-independent fireplace.
7,000 were for a mechanical ventilation system.
12,000 resulted from our house being 40 cm (16 inches) below the required height (gravel fill).
3,000 extra for earthworks, more than originally planned (originally 5,000).
7,000 were added as "unexpected" utility connection costs.
7,500 for the essential exterior work, since no one wants to live under a tarp for years.
2,000 for the chimney sweep because of that ridiculous ladder.
2,000 extra for the removal of excavated soil.
3,000 more for the garage than planned (planned was 8,000).
750 was the higher cost for soil analysis.
700 for a good lawn mower to cut our 600 m² (6,460 sq ft) lawn.
And so on and so forth... I could go on forever.
We haven’t even selected finishes or flooring yet... so it’s definitely not over 😀
We will probably have to dream about the terrace for at least another year 🙂
New furniture is also far down the list... our new house will feel quite empty since we’re moving with hardly any furniture... 🙂
But overall, it will all come together over time. We deliberately kept the loan small so we wouldn’t completely overspend.
Everything just has to come bit by bit. But it’s also nice to have something new to look forward to every year 😀