We're in the process of buying an apartment in German city. Kinda general thumb rule is EMI should be around 30% of the income. My understanding is this might make sense in USA because people have car, student, credit card debts.
But many of Germans don't. So can the average be 40%?
A bit about me, couple with 2 year old, living in a 1 bedroom apartment. It is getting tight. Maybe one more year we can live here, not more than that. Moving will be soon a NEED.
Rents doubled in here, so renting a decent 2 bedroom would be ~2000(including heating, electricity, internet)
So we opted to look for buying Even though rates are high, it's a buyers demand and we found really good 2bed 2bath apartment & huge garden. After negotiations price got reduced and with monthly payments of 2000 and 500 for maintenance, heating, water, electricity, internet, insurance, taxes). So total ~2600.
So total housing costs would be Renting 1800, rent-income-ratio 36%, 200 running costs
Buying 2000, buy-income-ratio 40%+ 500 house running costs
We have no debt and enough cash for 5% down, closing costs, 4 months worth nest egg. 40k invested.
Curent rent is 1000 and that's why from past 1.5 years every month we were saving 2000 monthly. Expenses around ~1700/month.
Does 40% makes sense? Or is it financial suicide. I feel it will make us house poor.
But I'm also thinking of it in this way. My wife isn't working right now and looking for jobs, as market isnt doing good it might take atleast 6-12months for her to get a job and this will relieve the burden and we can save well or pay mortgage faster. Until then it might be a bit hard for us. And I am sure we will never this kinda apartment for this rate again. Is worth taking the risk?
Any thoughts and suggestions? PS: We don't have a car and don't need one.
Edit: updated numbers which were wrongly represented initially.
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source https://www.reddit.com/r/RealEstate/comments/161sdgv/is_30_emi_to_loan_ratio_makes_sense_in_germany/
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