Use Hypofriend’s affordability calculator to see what you can afford based on your personal situation.
Let's see if buying makes sense to build wealth for you
You can see that buying can massively improve your net worth or wealth. Why is that? First the intuition of the main factors. If interest rates are 1.5% and your property appreciates by 4.0%, you immediately know that you are far better off buying (over time).
On top of that you save rent, although you have to consider the maintenance costs as well which in Germany fall under Wohngeld. Maintenance for an old building can amount to 1 % per year.
Buying a property worth 340.000 € today would increase your wealth by over 10 years compared to renting
Your purchase would breakeven in : your property value increase would offset the purchase fees in
How to factor in up front purchase costs?
Buying a house involves quite a few up front costs . In Germany these up front costs are high. Real estate agent fees are 3.57%, notary fees 2% and taxes on the purchase are 5.0% in Karlsruhe.
If you would decide to sell the day after buying you would not be able to recoup these costs. It is money gone. It thus immediately follows that if you decide to stay for a short period, it is not worth it to buy a house in Germany, unless you plan to rent out your house after you leave. In the Hypofriend calculator, we refer to the period you need to recoup your upfront costs, as the break even period . This is the minimum stay needed to make it worth your while financially to buy.
It also follows that if you do no want to stay for a long period you are better off with properties with no real-estate agent fees, such as newly built properties.
Does buying make sense from a monthly payment perspective?
Even if it makes sense from a wealth building perspective, you also have to be able to live a decent life and actually afford the house on a monthly basis.
For most people this is not an issue as interest rates are so low that some people can actually afford a larger house from a cash flow perspective then the house they can rent. This was not historically the case. In most periods in history, the biggest obstacle to purchasing a house was the high monthly payments in the beginning periods. Only over time the payments, relative to their income, would come down as their salaries increased and mortgage payments stayed the same, so people could take a breather.