Many families dream of owning their own home. Few know how to approach the implementation of this dream. First and foremost is the question: How much can we afford?? With the right calculation, the answer can be found out quickly. Before that, however, a conscientious cash audit is necessary.
In order to calculate how expensive the future home of one’s own may become, prospective buyers must first find out how much equity and monthly budget is available to them. In addition, ancillary purchase costs, interest and repayment installments play a decisive role.
Servicing credit instead of paying rent
In principle, anyone who has no problem paying their monthly rent can also make monthly payments on a loan instead. Families who live in rented accommodation and would like to realize their dream of owning their own home at some point should not wait too long before doing so. Because if you delay the decision, you may be giving away money.
Example: Two families each pay 850 euros cold rent per month. Calculated over the whole year, this is 10.200 euros. Family A decides to buy a home, takes out a loan for it and pays it off in monthly installments of 850 euros. Family B Has remained in the rented apartment for another five years and now also wants to buy or build a house. While family A with the monthly rates after five years already 51.000 euros, family B has paid the same amount for the rent, but has not acquired any property.
So it can be worthwhile to take the step earlier. But beware: the example listed does not mean that every renter can easily finance a house or condo. Many other factors play a role for the correct calculation.
How high is the monthly load limit?
When it comes to the question of how high the monthly installments for a loan may be, many people start from their previous rent. Basically, this is also the right approach. However, many make the mistake of counting on the warm rent. Then they quickly exceed their budget. The warm rent includes ancillary costs for heating, water, garbage and so on. These costs are also incurred in a home of one’s own – in most cases they even increase somewhat because the living space is increased. Therefore should always be calculated with the cold rent. It is also important to take a look at the last utility bills. How high was the consumption? If additional payments are still due?
All other expenses are also important for calculating the monthly load limit. All income and costs of the household must be carefully compared. It’s best for families to keep a budget book for several months, noting all income and expenses. This will tell you exactly how much money is left at the end of the month.
Attention: Do not calculate your expenses too tightly. Costs for clothing, school utensils, vacations, school trips, repairs and insurance are incurred irregularly and should therefore be set too high rather than too low. Also, do not plan for vacation pay, bonuses, possible salary increases and child support firmly. Once such benefits stop, or your children are no longer eligible for child support, there is a funding gap. Of course, you can still use the money: If there is ever anything left over, simply use it for unscheduled repayments to become debt-free more quickly or put it aside for possible renovation work.
Also, you should not firmly plan for the Baukindergeld for your financing. Because you can apply only if you have already bought or built a property. If you have planned for the building allowance and then do not receive it, you will have financial difficulties.
How much equity is available?
As a general rule, a certain amount of equity should be available for the purchase of a property. 20 to 30 percent of the purchase price is recommended. For banks, this reduces the risk, which is why they grant more favorable loans. Equity can be drawn from savings accounts, call money and time deposit accounts. Building savings contracts can also be used if they are ready for allocation. Those who own stocks, securities or unused land can think about selling them. An inheritance brought forward or money borrowed from relatives can also serve as equity capital.
Attention: If you have life insurance, do not cancel it, but keep it as security for the family.
Which ancillary purchase costs are there?
Who looks for real estate advertisements, must not only pay attention to the pure purchase price. The total amount that has to be paid in the end still includes so-called ancillary purchase costs. This includes land transfer tax (3.5 to 6.5%), notary and land registry fees (2%) and, in some circumstances, a broker’s commission (5.95%).
Example: For a house 179.000 euros costs, the following arise Incidental purchase costs:
Real estate agent commission: 10.650 Euro (179.000 x 5,95 : 100)
Posture: 8.950 euros (179.000 x 5 : 100)
Notary fees: 2.685 euros (179.000 x 1,5 : 100)
Land registry fees: 895 euros (179.000 x 0,5 : 100)
Total purchase incidental costs: 23.180 euros
Total cost: 202.180 euros
How much is the interest?
The height of the interest depends on different influences. First and foremost, of course, the interest rate level is decisive. Currently it is historically low, so that there are real estate loans from just over 1 percent. The creditworthiness of the borrower is also important for the interest rate. Who wants to buy or build without equity, for example, must expect higher interest rates. But a regular income and a secure job also count as creditworthiness.
Interest rate level and creditworthiness cannot or. Can only be influenced to a small extent. However, the fixed interest rate is in the hands of the borrower. Fixed interest rates determine how long borrowers want to lock in current rates for the future. In times of low interest rates, it is a good idea to agree on a long fixed-interest period. For this, the bank requires a surcharge, so that the interest z.B. Can rise from 1.1 percent to 1.4 percent. In return, however, borrowers also receive security. If the fixed interest rate expires after only a few years and the general interest rate level has risen, borrowers have to pay more and may get into financial difficulties. The risk is difficult to calculate. A long fixed interest rate can be planned much more reliably for the financing.
How high are the repayments?
The agreed repayment rate is also crucial. There are offers that look very attractive with a repayment rate of 1 percent, because the monthly installments are very small. But the lower the repayment rate, the longer it takes to pay off the loan. And the longer the loan runs, the higher the sum of interest costs will be. Therefore, a repayment rate of at least 2 to 3 percent is a good idea. This allows borrowers to become debt-free a few years earlier and save several thousand euros.
Example: With a loan of 100.000 euros and a repayment rate of 1 percent, the monthly installment is 250 euros. The borrower takes 55 years to repay the loan and pays ca. 65.000 Euro interest. A repayment rate of 3 percent increases the monthly installment to 416 euros. But the repayment takes only 25 years and the interest costs are reduced to 28.000 euros. The borrower can therefore afford 37.000 euros and save 30 years of time.
Attention: It should be contractually stipulated that unscheduled repayments are possible at any time. Thus, borrowers can deposit extra money if they have some to spare. Families can use the Baukindergeld excellent for annual unscheduled repayments and thus become debt-free significantly faster and save thousands of euros interest.
So how much can the home cost?
Whoever has determined his monthly load limit, available equity, interest rate and repayment rate, can easily calculate how much home he can afford to own.
Maximum annual load : (interest rate + repayment rate) = maximum loan amount
Monthly load limit: 850 Euro
Annual maximum interest : 10.200 Euro (850 Euro x 12 months)
Interest rate: 2 percent
Repayment rate: 2 percent
10.200 : (0,02 + 0,02) = 255.000 euros
255.000 euros is the maximum loan amount. Who still has equity capital in the amount of 45.000 euros can afford a property worth 300 euros.000 euros afford. Attention: Here it concerns not the pure purchase price, but the price together with purchase additional expenses (see above).
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