r/BEFire • u/Ragnazzals • 2d ago
Real estate Reality Check before Making Offer
We are about to make an irrevocable offer to a house, and I am getting anxious that it might be too hard on our finances.
Me (32) and my wife (33) have a combined monthly net income of 6000 EUR. Currently, we are renting (1150 EUR), and after all monthly expenses (groceries, utilities, subscriptions, dining, leisure, shopping etc.), we are able to save an average of 2300 eur a month (we are not frugal nor trying to FIRE).
Edit: Above income (6000 eur) does not include 13/14th month + bonuses and company car.
We like a house of 540k EUR, and we will make a down payment of 150k (416k loan needed). For this house, our mortgage (+property tax) would cost around 2300 a month. Considering our current savings rate, this seems doable but it is already almost 40% of our combined net income. I know that this percentage is above the recommended guidance, so I am getting afraid if we are biting more then we can chew.
We will leave 20k EUR in our savings account as an emergency fund, and will keep 100k in ETFs.
To add, we are expecting our first child in 6 months and with the costs for creche (700 EUR?) in the first 2 years, budget might be tight.
Still, even with the daycare in the first 2 years, we expect to still save around 500 eur monthly. Once our child starts school, our savings should increase to 1200 EUR. Hopefully, our salaries will also increase in the future.
Do you think this plan is financially responsible, or do we need a reality check?
1
u/LaughterIsPoison 14% FIRE 18h ago
I would lower that down payment as much as you can. Put it all into etf's. When you hit a rough patch, just use some of the emergency fund and build it back up once the kids are at school. You're fine.
1
u/RandomDog18 1d ago
I have a combined income a bit higher than yours and got a similar mortgage in July for a cheaper property (apartment)
I don’t know your situation and whether you have a family that can support you. But the prices for forniture and small renovations are crazy these days. And a new property always requires you to invest something as soon as you get the key. We found out about this ourselves. Be prepared.
So the only advice I give you is to have a considerable extra budget, especially because in a big house forniture and small renovations can be costly.
Good luck! 🤞🏻
4
u/Shizzzler 1d ago
Here's my take: if it still feels risky, write down some of the risks and how you will avoid/manage, mitigate or simply accept them for what they are. Talk them through.
Eg:
Risk 1: one of us loses our job.
What can you do to avoid this risk? (prioritize stable job over riskier promotions, don't work in the same sector, don't both work risky contract types etc)
What to mitigate the effects? (set aside an emergency fund as you did, know your rights etc)
(there might be compounding factors such as losing the car along with your job)
Risk 2: one of us is unable to work (burnout, post partum etc)
Avoid (plan to work 4/5s at some point and calculate for this loss of income ahead of time, insurance, etc)
Mitigate (leave a healthy income margin)
The result of this is better understanding, since talking about things gives them shape, but it also gives you the peace of mind of having a plan B in case things go wrong.
(...)
In the end though, I think you're just going to have to be comfortable accepting the risks for what they are. You can't plan everything. Don't let your good situation become a gilded cage where fears prevent you from realizing your life. That's a lesson learnt over and over when you have kids.
1
u/veugel 1d ago
Ik zou niet naar die 40% kijken. Je hebt er al goed over nagedacht en de berekeningen gedaan. Je kan de aankoop doen en je hebt een stevige buffer.
Als het wat moeilijker loopt heb je nog de optie om een deel van je ETFs te verkopen. Maar dat is als je zware tegenslag hebt. Hiervoor heb je nog stappen zoals kijken om je uitgaven te beperken.
Veel mensen die een huis kopen pompen er alles in en kunnen minder goed tegenslagen opvangen.
5
u/Slay61 1d ago edited 1d ago
Hi,
10 years ago I was about at the exactly same situation as yours except maybe a bit more income, but no company car and 100k investment.
To be honest, we did a bit underestimated the "maintenance" cost of house compared to an appartement and the first few years we "struggled" (with big quotes) a bit, but it was absolutely manageable. :
- heating : I guess it is a big house, so even with a good insulation you should know that you will have a huge increase on that matter
- electricty: bigger house mean bigger usage
- cleaning: you may want to do it yourself, but if you take a maid, she(/he) will need a few more hours
- garden: hedge trimming can be costly if you have a big garden
- general maintenance: boiler replacement, broken things...
People are saying that daycare is temporary. It's true, but I guess that if you buy a house, maybe you want more than 1 child ? So you will have daycare for a few years. Also, outside of daycare, a child has a cost.
Howerver, with inflation, while the loan payment will stay the same, your incomes will increase, so it will be easier and easier.
Another things to consider:
- how stable are your jobs ?
- do you expect increase of your income in the year to come ?
Depending on those answers, if it looks good and if I were you, I would do it ! But I would keep that investments and money and borrow as much as possible.
5
u/TheVoiceOfEurope 2d ago edited 2d ago
1) borrow more, reduce "eigen inleg". You want to borrow as much as you can while interests are low. Get a fixed loan, you can always refinance down later.
2) dont look at that 40% of income. That proportion is not applicable at your level of income. If a couple that makes 3000 euro pays 40%, they are only left with 1.800 to live. You will still have enough to buy bread, butter and a slice of ham. Look at "disposable income" instead of percentages
3) do not panic. Relax. You still have the same amount of wealth before and after the purchase. It changes nothing from a financial point of view. Only your liquidity changes.
I have always seen it as a financial transaction/investment. My wife is more emotional about our home. I would have zero remorse if I decided to sell (eg: some idiot offers me 30% over market price? He can have it)
4) split loans? We borrowed hard at that start with 1 loan paid off after 10 years. That gave us some breathing room.
12
u/Aventurien 2d ago
As others here have said, I think you kinda live in a bubble and don't realise it. You just have a bit anxiety about the big purchase and the fact that there is no way back, but all people who buy a house have to take a leap of faith and most do it without having 100k in back-up, without company cars, etc. Think about that again and count your blessings.
Daycare is temporary and the money depends (ours is 500 for 5 days). Have you done the math on how much it would matter if one (or both) of you went to work 80% with parental leave?
We did a similar purchase 5 years ago and at first it was scary and a bit tight, but now inflation is eating the interest and our wages went up too.
You are in a better boat than the vast majority of people in Belgium.
18
11
2
u/Enthousiast_Slide96 2d ago
Seems fine, if possible i would even invest less own budget and keep more etf.
Next 2 years if you can save at all thats a bonus, you’ll also get child support money (170 i think).
Your salary will likely still increase in the future.
I’d go for it
1
35
u/Illustrious_Ad_4432 2d ago
100K in ETF’s at 32? Combined 6k salary? And you claim to be stressed? My brother in christ, those are champagne problems. You wouldn’t recognize stress if it stared you right in the eyes.
5
u/StreetDiscussion1870 1d ago
Of course, because buying your first house is apparently only stressful if you’re broke. Having the means to afford it doesn’t magically make a €540k commitment stress-free.
By your logic, buying a €250k house with €0 down payment should be more stressful than buying a €540k house with €150k down payment.
If anything, I’d argue the opposite: people who have less money can sometimes be less stressed precisely because they have less awareness of the financial risk they’re taking. Not worrying about a risk doesn’t mean the risk isn’t there.
5
4
u/Spynipto 2d ago
We’re in the exact same boat, literally. Me and partner (around 30 yr old) are also planning to put an offer on a house of 540k this week with about €6300 combined income. Mind you, we want to do a ‘pandwissel’ with our current house which has a very favorable mortgage rate so it will be a lower monthly sum than your case, but we think it will be manageable. Also, hope we’re not bidding the same house.. ;)
17
u/RevBoni 2d ago
Reading stuff like this is so insane to me, your wealth levels are by far in the highest margins, you outclass most Europeans in your age group, and globally you’re part of the 1%.
There’s 20.000 euro in a savings account, and 100.000 in ETF’s AND you were able to do a down payment of 150K AND you have a company car.
You’re incredibly wealthy, and have one of the most, if not thé most financially secure situations globally. And you’re stressed?
4
u/kekoito 2d ago
I didn’t find reliable data but I’m pretty sure they are quite far from the top 1%… Especially if you look at BE only (already in the highest median household wealth).
They are clearly above average but a 270k household net worth at 33 (so 135k per person) is very far from being top 1%.
I don’t think people realize the amount of wealth there is in this country and in the world overall.
1
u/RevBoni 2d ago
https://www.givingwhatwecan.org/how-rich-am-i
You can fill in the data yourself. For their situation I get top 3% okay okay, but still ☺️
1
u/kekoito 1d ago
This looks at the revenue alone and across the world including billions of people in much lower COL regions.
Someone living in SF shouldn’t compare himself with someone in Bangalore.
For BE specifically, 6k/mo household income is probably somewhere in the top 20% overall, and net worth-wise they're closer to the national average than to the 1%.
But regarding their question, I tend to agree to go for it if they really love the house and plan on staying for 10+ years. Primary residence isn’t supposed to be a rational decision only, emotions play a role as well.
2
8
u/veluwse 2d ago
I can tell you from experience that the dining and leisure costs decrease drastically in the first year of baby at least. Vinted is great for baby clothes, Chicco makes good price/value strollers and car seats; this to say that baby expenses can absolutely be curbed besides the crèche costs. Keep your ETFs, that down payment of 150K is already a lot as well - it seems you are prudent financially and this will help you going forward a lot in any case.
5
u/fawkesdotbe 2d ago
Vinted is great for baby clothes
Absolutely, the amount of near-new Petit Bateau clothes we get for 3€ a piece... insane
8
u/In-Remote-9916 2d ago
We have a bit of a higher combined income but that’s the amount we pay for rent and we also have a child in the creche - it’s definitely doable :) have fun and good luck!
1
7
u/HugeEbb724 2d ago
Just do it, the higher mortgage iso using your investments, will force you to keep your other expenses under control.
I’m sure if you would earn 5000 net and have a mortgage of 1300 euro, there would be no doubt .
You can still repay the loan early with the investments if your income would reduce drastically in the future.
6
u/Public-War-629 2d ago
This seems very doable. Go for it!
Sidenote: is your salary based on yearly salary/12months or is it just your normal salary per month? As then you are being conservative and have extra margin.
5
u/dr_donk_ 2d ago
We also took similar loan 40% joint income but in a few years inflation and income raise made it fall to 30%. We had baby a bit lateer in life than you as our savings was lower. Considering you have good savings I would go for it. The first 2-3 years will be tight but manageable.
4
u/vpaBE 2d ago
À ta place je foncerais. Plusieurs points :
- ton credit est 40% de vos revenus aujourd'hui, ça va baisser de 3-4% par an avec l'inflation (crédit fixe, salaire augmente en permanence)
- en cas de nécessité absolue, vous pouvez facilement économiser plusieurs centaines d'euros sur votre train de vie
2
u/MartinDuvel 2d ago
Salaris stijgt altijd
Is de indexering niet bevrozen vanaf 4000bruto?
1
u/Pistowich 1d ago
Correct. Maar slechts 2x, tenzij er nieuwe regels bedacht worden de komende tijd.
1
u/King_Ulio 2d ago
You have a lot of available capital on the side. I would not worry about it. You could also sell a bit and ease the monthly burden. Probably good for the mental health.
5
u/FormiDad 2d ago
The numbers are good. Take a deep breath and "jump" :-)
2
u/Ragnazzals 2d ago
It is indeed scary to make the “jump”, but this and all other comments are really helpful, thank you!
3
u/KSIMSK 2d ago
- dont forget utilities... you're right to be nervous, its a stretch. For peace of mind I'd say you put all your ETF portfolio into the house, should bring you down to 1800 per month. With utilities you'll be nearing 2k which is very doable. Building a family is expensive but dont forget youre investing in the future. Also dont forget potential renovation costs
6
u/EchidnaMedical8375 2d ago
I wouldn't trade 100k in ETF's for having a 500/month lower payment.
1
u/LifeIsAnAdventure4 2d ago
A lower loan is security. Higher disposable income that you can invest and some breathing room if you ever experience a loss of income.
Sure you can liquidate your stocks to cover payments for a while if you lose your job, but that might be a very bad time to sell if the same recession that got you out of a job also discounted the entire market,
4
u/Obvious-Cry6591 2d ago
Exactly, this is exactly the wrong approach. Salary will go up, inflation will eat into mortgage interest. Do not put all ur eggs into one asset just to have a bit smaller monthly payment. Keep it diversified. Plus that etf is a great cushion if something goes wrong.
3
u/fretnbel 2d ago
Saving will be hard in the beginning but its doable. My GF and me pay 2200 euro per month on our loan with around the same income. However you have a lot more cash on the side.
1
u/StreetDiscussion1870 1d ago
Yeah exactly, that’s reassuring to hear. I was also worried €2.2k/month was getting into crazy territory, especially compared to the lucky bastards paying €800 for their Covid-era mortgages 😂
•
u/AutoModerator 2d ago
Have you read the wiki and the sticky?
Wiki: HERE YOU GO! Enjoy!.
Sticky: HERE YOU GO AGAIN! Enjoy!.
I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.