How Much Does It Cost to Build a House in Germany This Year? A Comprehensive Guide

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Are you considering buying a house in Germany? With the rise in interest rates in 2022, it’s important to understand how much salary you will need to afford a €500,000 house. In this article, we will delve into the details and provide you with a comprehensive guide to help you make an informed decision.

Before we begin, it’s important to note that every situation is unique and home loan financing is individual. Therefore, the information provided here is a generalization and may vary based on your specific circumstances. For personalized advice and assistance, it is recommended to consult with a professional in the field.

Let’s start by looking at the monthly installments you would need to pay to the bank. The installment consists of two parts: the interest and the repayment of the loan. Currently, interest rates are higher compared to previous years, with some home loans being financed at four percent. Most banks prefer a repayment rate of around two percent, although this can vary. For the purpose of this article, let’s assume a two percent repayment rate.

To calculate the monthly installment, we need to divide the annual installment (six percent) by 12. So, for a €500,000 loan, the monthly installment would be €2,500.

However, banks also take into account the cost of living when assessing your eligibility for a loan. Each bank has a different default value for cost of living, depending on factors such as the number of people in your household and the number of cars you own. This means that even if one bank does not finance your loan, another bank might have more flexible requirements. It’s important to consider your own comfort level with the monthly installment and factor in other costs such as utilities, taxes, and personal expenses.

Now, let’s categorize the suggested salary requirements into three parts: 30%, 40%, and 50% of your net household income.

  • If you are able to spend 30% of your net household income towards the monthly installment, it will be considered as easy financing. In this case, you would need to earn €8,333 per month, leaving you with approximately €5,800 for other expenses.

  • If you are spending 40% of your net household income towards the monthly installment, it’s still considered solid financing. To afford the €2,500 installment, you would need to earn €6,250 per month, allowing you some room for leisure activities.

  • If you are spending more than 50% of your net household income on the monthly installment, banks may view it as risky. Only a few banks may be willing to finance you in this case. Your monthly earnings would need to be around €5,000.

It’s worth mentioning that these are generalized figures and there are cases where borrowers can afford to pay more than 50% of their income towards the installment. This can be possible, for example, if both spouses are working and collectively earn more than €8,000 per month. Ultimately, each case is unique and requires careful consideration.

Another important factor to consider is your own contribution, also known as own equity. While the bank may finance up to 100% of the purchase price, they expect you to contribute towards ancillary costs such as notary fees, court charges, land transfer tax, and broker fees. These costs typically amount to around 8.5% of the purchase price. If you are able to bring in €42,500 as own equity, the bank will finance the remaining €500,000.

It’s important to note that securing a loan without any own equity can be challenging, and only a few banks may be willing to finance such a deal.

To summarize, if you are able to contribute €42,500 as own equity and finance 100% of the €500,000 purchase price, you would need to earn at least €5,000 per month after taxes.

Keep in mind that there are many other parameters to consider when it comes to home loan financing, and the information provided here is just the tip of the iceberg. It is advisable to consult with a professional to fully understand your options and make the best decision for your individual circumstances.

In conclusion, buying a house in Germany requires careful financial planning and consideration of various factors. By understanding the costs involved and your own financial capabilities, you can make an informed decision and achieve your dream of owning a home in Germany.

If you have any questions or would like personalized advice, feel free to reach out to our experts. We are here to help you navigate the complex world of home loan financing and make your dream a reality.

Contact us for a free consultation and let us guide you through the process of buying a house in Germany. Together, we can make your dream home a reality.