How much income does one need to buy a house


One should not spend more than 40 to 45 percent of the regular, monthly net income for the property .

(Photo: imago stock&people)

Before buying a property, it’s necessary to take an honest look at the cash flow. In addition to net income, ongoing savings and equity also count. How to determine your loan amount.

In view of rising rents, some people think they would be better off investing the money in a home of their own. This would also be a good retirement provision. Before the search for the dream house should be sounded out however absolutely the financial possibilities. Is there enough money to finance a building loan?? How to determine what loan amount can be financed with your own income and savings?

"The previous rent is an important part of the financing, but alone will not be enough", means Niels Nauhauser of the consumer center Baden-Wuerttemberg. The warm rent is often taken as a yardstick. Available, however, is actually only the significantly lower cold rent. The reason: Operating costs, which are included in the warm rent, are also incurred in the new house.

Clear cost breakdown brings clarity

The first step in determining your own monthly liquidity is to compare your income and expenses. On the one hand, there is the net income, any capital gains and other income such as child benefits.

On the expenditure side are living costs plus expenses for insurance, reserves for purchases or vacations. "Income minus expenses – that is the monthly liquidity", explains Niels Nauhauser.

There are rules of thumb according to which the loan installment should not exceed, for example, 30 or 40 percent of net income. But the consumer protector does not think much of such rules of thumb. Consumption habits are just very different, accordingly, the rate must be determined individually.

Do not forget the savings rate

Max Herbst from FMH Finanzberatung advises planning around 35 percent of the family’s monthly net income for financing. "And only the net income should be taken, not the disposable income. So the calculation is made without child benefit, overtime and 13. Monthly salary."

An important component for a real estate financing is the monthly surplus. In order to find out the possible amount of their loan installment, one should look at what one has saved continuously. "The amount effectively left at the end of the year plus the cold rent mathematically provides an indication of the maximum possible loan installment per year", says Nauhauser.

The banks look already also after it, how much the customer saves monthly, knows Max autumn. "If the customer has regularly put 500 euros a month aside over the last three years, they may well consider this to be a contribution to secure installment financing. They assume that this will also be possible in the future."

Important questions to consider

But saving alone is not enough. Without equity capital the acquisition of a real estate is today hardly possible. Who brings a larger sum into the real estate financing, must take out less credit. So all inheritances, gifts and other income should be taken into account. "At least the ancillary purchase costs should be covered with it", says Max Herbst.

Since a real estate financing drags on over many years, it is important to know not only the current liquidity, but also to estimate the future financial circumstances as an owner, means Niels Nauhauser.

The following questions are important: What additional expenses will be incurred?? How high is the house money? How much money do I need for insurance, taxes and reserves for repairs? If ancillary costs for electricity and heating in the property will be higher than before? If the costs for the journey to the place of work change?

Calculators help with determination

How much the loan will be in the end can be determined, for example, with the free house price calculator from Stiftung Warentest or FMH-Finanzberatung. This allows users to realistically estimate the maximum purchase price for the property they can afford with their income and savings. Different scenarios can be played out, for example, how different loan terms will affect the situation.

It makes sense to repay as quickly as possible, especially now when interest rates are still low, says Stiftung Warentest. Loans with very low monthly installments often have very long maturities. During such periods, the risk of interest increases.

Who plans today altogether about four per cent at interest and repayment, hardly needs to worry also in the future that higher interest completely thwarts the financing plan, means Max autumn. Provided the repayment rate is large from the start, for example, 2.5 percent in addition to 1.5 percent interest. Then the debt from the first day of the term of the loan will be less.

If the fixed interest rate ends after 15 years and the interest rate rises, only the remaining amount, about 60 percent of the original loan in this example, must be financed at the higher interest rate. Even then, however, the repayment should be as high as possible so that the loan does not run for too long.

Stay flexible

If only a small amount is repaid, the mountain of debt is reduced only very slowly. "If you wanted to calculate with the formerly common one percent amortization, you would have to plan for a financing period of about 65 to 70 years."

It is important to plan for a certain flexibility, advises the consumer advice center Baden-Wurttemberg. After all, life circumstances can change, for example, when children come or care cases arise in the family. "The financing should be based on the life and not the life after the financing", also emphasizes Max Herbst. Better to pay off a little less at times, but improve the education of children, is his advice. "The repayment rates can be adjusted with most banks and insurance companies during the term more often to the various circumstances."

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