Hello home builders,
We (27 and 28) are considering building a single-family house. We originally wanted a new condominium, but realistically, that’s not an option due to prices in the city and our “pet problem” (location, layout, price, limited to the ground floor). Then, through a private offer, we came across a plot of land in a sought-after new development area (not in the city) and started thinking about it.
Of course, we feel like this is a bit overwhelming — I have been in my job for two years, and my partner a bit longer.
Our financing plan would look like this:
House €230,000 + land €50,000 + earthworks, slope stabilization, and additional costs €60,000 = at least €350,000
Current equity combined €120,000, we want to keep a €20,000 buffer, so €100,000
Loan of €250,000 with various terms (KfW, annuity loan, and a home savings contract loan which can run up to 20 years if necessary). My partner also has two ongoing home savings contracts that will bring in another €100,000 in 10 years and could be used for repayment.
Current combined income is about €5,200, both full-time, with contractual salary increases. Currently, each of us saves €1,500 per month plus €500 rent.
It actually sounds like something we could manage. Especially with the low interest rates tempting us, and at some point we want a house, that’s clear.
Point #1: Children — we currently earn almost equal amounts, so I really can’t afford to take a long leave. How have you dealt with that? Do you calculate only with one income? With the 10% special repayment option, you can pay quite a bit extra towards the monthly rate.
Point #2: What happens if we separate? My partner would have to carry the house alone. Have you contractually fixed such contingencies in advance?
Point #3: Does it make sense to design the floor plan so rooms can be partitioned later, which we don’t need right now? Or is that disproportionately expensive?
Thank you for any kind of responses and ideas!
We (27 and 28) are considering building a single-family house. We originally wanted a new condominium, but realistically, that’s not an option due to prices in the city and our “pet problem” (location, layout, price, limited to the ground floor). Then, through a private offer, we came across a plot of land in a sought-after new development area (not in the city) and started thinking about it.
Of course, we feel like this is a bit overwhelming — I have been in my job for two years, and my partner a bit longer.
Our financing plan would look like this:
House €230,000 + land €50,000 + earthworks, slope stabilization, and additional costs €60,000 = at least €350,000
Current equity combined €120,000, we want to keep a €20,000 buffer, so €100,000
Loan of €250,000 with various terms (KfW, annuity loan, and a home savings contract loan which can run up to 20 years if necessary). My partner also has two ongoing home savings contracts that will bring in another €100,000 in 10 years and could be used for repayment.
Current combined income is about €5,200, both full-time, with contractual salary increases. Currently, each of us saves €1,500 per month plus €500 rent.
It actually sounds like something we could manage. Especially with the low interest rates tempting us, and at some point we want a house, that’s clear.
Point #1: Children — we currently earn almost equal amounts, so I really can’t afford to take a long leave. How have you dealt with that? Do you calculate only with one income? With the 10% special repayment option, you can pay quite a bit extra towards the monthly rate.
Point #2: What happens if we separate? My partner would have to carry the house alone. Have you contractually fixed such contingencies in advance?
Point #3: Does it make sense to design the floor plan so rooms can be partitioned later, which we don’t need right now? Or is that disproportionately expensive?
Thank you for any kind of responses and ideas!
Hello,
I am in a similar situation and have also wondered for a long time whether building young makes sense. Of course, like with everything, there are pros and cons. A big factor is certainly whether and when you want to have children. Building with children in mind is not an option for me. So, either before having children or when they are old enough. The second option has the advantage that you could probably afford the house without debt. On the other hand, owning a house mainly makes sense while the children still live at home. Also, no one really knows what will happen in 20 years—perhaps there will be a war again, and then the dream of owning a house would be over anyway. So personally, I have decided to build young.
One more question about the income. Is the 5,200 gross or net? If it is net, I wouldn’t worry at all and would decide to build without hesitation.
Now to your questions. Since I plan to build myself only in 2016–2017, I can’t give you well-founded answers. But maybe it still helps, especially if we share similar views.
I am in a similar situation and have also wondered for a long time whether building young makes sense. Of course, like with everything, there are pros and cons. A big factor is certainly whether and when you want to have children. Building with children in mind is not an option for me. So, either before having children or when they are old enough. The second option has the advantage that you could probably afford the house without debt. On the other hand, owning a house mainly makes sense while the children still live at home. Also, no one really knows what will happen in 20 years—perhaps there will be a war again, and then the dream of owning a house would be over anyway. So personally, I have decided to build young.
One more question about the income. Is the 5,200 gross or net? If it is net, I wouldn’t worry at all and would decide to build without hesitation.
Now to your questions. Since I plan to build myself only in 2016–2017, I can’t give you well-founded answers. But maybe it still helps, especially if we share similar views.
- It always depends. I would calculate based on the higher income and adjust the monthly burden so that it could just be managed with one salary. However, only if there is a possibility that the family (especially the parents) can step in during emergencies. Otherwise, of course, less. The rest should then always be paid off with special repayments. But make sure to check beforehand that no hidden costs are involved.
- Unfortunately, I can’t help you much there. Are you married or is a wedding planned?
- If 150m² (1,615 sq ft) is possible, why not. I see little potential upstairs, as three rooms plus a bathroom don’t leave much flexibility. More so on the ground floor, where later you could partition a large living and dining area to create an additional room. I definitely plan to have a study on the ground floor, which can also be used as a bedroom later in life if I can no longer manage stairs. At the same time, a suitably large bathroom, not just a small toilet.
Thank you for your reply.
Yes, currently a net income of 5,200, each of us about half. It would only decrease significantly if one of us worked part-time or something similar, since I’m covered by a collective wage agreement.
Of course, if everything goes smoothly, I’m not worried about paying it off fairly quickly. But as we all know, life sometimes turns out differently than expected.
For me, the main reasons to build now are the low interest rates plus around 5 years of time (until children possibly arrive), which allows for paying off a substantial part. Additionally, we’re still living in our student apartment and definitely want to move out (as I said, the initial plan was to buy a condominium).
My parents are a bit skeptical, advising me to save for a few more years (why? Then interest rates might be higher again?).
Your second option (waiting until the children are grown to build) is definitely not an option for me, as by then I’d be quite old. And yes, the house is meant to be for the children.
We are not married yet, and it’s not planned for now, but I think if we have children, we will probably get married—but not in the next few years. This is of course a difficult topic, but since we’re building in “his” hometown, I’m naturally concerned about not ending up with a bigger financial loss in case of separation.
Prepayments up to a limit of 10% are free of charge. The current interest conditions look very good, especially compared to the loans our parents have.
Still, there is of course the feeling that you’re being tempted into something just because it’s currently so cheap.
Yes, currently a net income of 5,200, each of us about half. It would only decrease significantly if one of us worked part-time or something similar, since I’m covered by a collective wage agreement.
Of course, if everything goes smoothly, I’m not worried about paying it off fairly quickly. But as we all know, life sometimes turns out differently than expected.
For me, the main reasons to build now are the low interest rates plus around 5 years of time (until children possibly arrive), which allows for paying off a substantial part. Additionally, we’re still living in our student apartment and definitely want to move out (as I said, the initial plan was to buy a condominium).
My parents are a bit skeptical, advising me to save for a few more years (why? Then interest rates might be higher again?).
Your second option (waiting until the children are grown to build) is definitely not an option for me, as by then I’d be quite old. And yes, the house is meant to be for the children.
We are not married yet, and it’s not planned for now, but I think if we have children, we will probably get married—but not in the next few years. This is of course a difficult topic, but since we’re building in “his” hometown, I’m naturally concerned about not ending up with a bigger financial loss in case of separation.
Prepayments up to a limit of 10% are free of charge. The current interest conditions look very good, especially compared to the loans our parents have.
Still, there is of course the feeling that you’re being tempted into something just because it’s currently so cheap.
D
Doc.Schnaggls2 Jan 2015 10:57Hello Nina,
Given your situation, I would also lean more towards building a house rather than buying a condominium.
I personally bought a small 2.5-room condo when I was 27 and almost fully financed it, as I had treated myself to my dream car a year earlier and spent my savings from five years.
My loan amount was just under 160,000 EUR (about 170,000 USD), with a net income at the time of 1,800 EUR (about 1,900 USD). It was sometimes tough, but manageable without major sacrifices.
Calculate what your income would look like if one of you were unable to work for a while (children, unemployment, illness, etc.).
Also important and still relatively affordable at your age is disability insurance.
To clarify the situation of “not yet married but building together,” I would recommend a consultation with a competent notary—he or she can explain all contingencies and possible contractual arrangements. It costs a bit, but in my view, it is money well spent.
I can hardly believe that. Banks usually compensate for the “risk” of special repayments through a higher interest rate. So you pay no fees for special repayments of up to 10% per year, but in return, you accept a somewhat higher interest rate over the entire term.
Since both of you are still relatively young, I would recommend a relatively long fixed interest period of 25 to 30 years with a moderate repayment rate (2% initial repayment) combined with the option for special repayments (for the part that is not to be redeemed with the home savings contract). That way, you can repay aggressively if you want, but you don’t have to.
I would also have the possibility included in the contract to adjust the repayment rate two to three times without fees.
Have you checked whether your partner’s home savings contracts are actually cheaper than current bank loans?
Regards,
Dirk
Given your situation, I would also lean more towards building a house rather than buying a condominium.
I personally bought a small 2.5-room condo when I was 27 and almost fully financed it, as I had treated myself to my dream car a year earlier and spent my savings from five years.
My loan amount was just under 160,000 EUR (about 170,000 USD), with a net income at the time of 1,800 EUR (about 1,900 USD). It was sometimes tough, but manageable without major sacrifices.
Calculate what your income would look like if one of you were unable to work for a while (children, unemployment, illness, etc.).
Also important and still relatively affordable at your age is disability insurance.
To clarify the situation of “not yet married but building together,” I would recommend a consultation with a competent notary—he or she can explain all contingencies and possible contractual arrangements. It costs a bit, but in my view, it is money well spent.
Nina132 schrieb:
The special repayments are free up to a rate of 10%.
I can hardly believe that. Banks usually compensate for the “risk” of special repayments through a higher interest rate. So you pay no fees for special repayments of up to 10% per year, but in return, you accept a somewhat higher interest rate over the entire term.
Since both of you are still relatively young, I would recommend a relatively long fixed interest period of 25 to 30 years with a moderate repayment rate (2% initial repayment) combined with the option for special repayments (for the part that is not to be redeemed with the home savings contract). That way, you can repay aggressively if you want, but you don’t have to.
I would also have the possibility included in the contract to adjust the repayment rate two to three times without fees.
Have you checked whether your partner’s home savings contracts are actually cheaper than current bank loans?
Regards,
Dirk
Nina132 schrieb:
Of course, we feel like this is all a bit too much – I’ve only been at my job for two years, my partner a bit longer. Hello Nina,
Even if the salary is great, I would advise you to reconsider the statement above. Numbers aren’t everything, and nothing is going anywhere – settling down can always happen later.
I usually warn against starting to build your nest too early, but people are different. Also, you can’t predict whether a relationship will last forever or just one or ten years. Nothing comes with a guarantee, and if you take the possible outcomes into account without being overly optimistic, it’s fine...
as long as you feel comfortable with your situation!
Best regards, Yvonne
jaeger schrieb:
Building with children around is not an option for me. So either before having kids or when the kids are old enough. May I ask why not? We are currently building with three children. It’s absolutely no problem at all. The kids are excited about the construction site, the machinery, and so on. We know exactly how much space we definitely need. If we had built before having children, we probably would have regretted it later—just like we are doing now in the rented terraced house.
@TE: If marriage and children are not yet planned and you actually want to wait, then do so. But I would probably look for a rental apartment unless building is off the table for now. If interest rates rise, it won’t suddenly be by 5%. (Wouldn’t savings interest rates increase then as well?)