When should people buy a house

Whether you're looking to buy a house or build your own, your age doesn't matter. There is no such thing as “too young” or “too old”. Rather, the decisive criterion is your financial situation.

Live for rent? Young people usually only want this for a limited period of time. At some point, many hope to fulfill their dream of a life in their own four walls. Those in their early or mid-twenties often think they are too young to buy or build their own home. Life in your own property has absolutely nothing to do with age. Rather, the following factors are important:

  • Is there enough equity - around 20 to 30% of the purchase price?
  • What is the financial situation - do I, or do my partner and I have, secure income such as an open-ended employment contract?
  • Will I stay or will we stay at my current place of residence for the next ten, 20 or 30 years?

If you answer “yes” to all three questions, you can forge concrete plans for buying or building your own home. When it comes to “how to pay?” There is a simple formula: equity plus promotional loans from KfW Bank, for example, plus bank loans - and the financing is in place.

That speaks for it:

  • The sooner you start real estate financing, the sooner you will have paid back the loan.
  • By the time you reach retirement age, you may have paid off your debts. That means: In old age, apart from the additional costs, you live free of charge and get significantly more from your pension.
  • Those who finance young people benefit from their own property for a longer period of time.

That speaks against it:

  • Young people in their early or mid-twenties often do not know whether they will one day live somewhere else for professional or private reasons.
  • Often in their twenties they do not have the necessary equity to buy a house or build their own home, after all they have only been earning their own money for a relatively few years.

You do not have the necessary equity of at least 20 to 30% of the purchase price? Then put your real estate plans aside and save. The more equity you bring in, the better conditions you will get for mortgage lending. Also keep in mind that buying a house or building your own home entails additional costs such as real estate transfer tax, brokerage or notary fees.
 
Tip: Stay realistic! A dream house on a dreamlike property is often expensive - and for many, financially unacceptable even after a long period of savings.

Therefore: Stay realistic and only approach real estate plans that are affordable for you.

The sooner you start saving, the sooner you will have the necessary equity. Anyone who puts money back or investing in a property should in any case have a short-term financial cushion of two to three monthly salaries for unexpected expenses. Because unforeseen expenses can arise again and again - for example a defective washing machine or dishwasher or repairs to the car.

Given the current low level of interest rates, a long-term fixed interest rate of at least ten, better still 15 or 20 years is advisable. Loans with a term of 15 or 20 years have slightly higher interest rates. In return, buyers or home builders are on the safe side that interest rates will not increase for them during this time.

Even at an advanced age, it is possible to finance a property with a loan. Since many of the so-called best agers over 50 have arithmetically less time to repay the loan by the time they retire, they have to

  • bring a higher equity ratio than 20 to 30% of the purchase price and
  • prepare for higher repayment rates.

A repayment model is also conceivable, with which the monthly installment is lower after the start of retirement. And don't forget: When you reach retirement age, it is not uncommon for money to be paid, for example from life insurance. You can then invest these funds in your property straight away.