Development on someone else's property

Hello everyone!

My husband and I are currently in the following tricky situation: We are planning to build a house with hopefully around 350,000 euros total costs (excluding garage/outdoor facilities), of which about 80,000 euros are for the land. We are already contributing nearly 200,000 euros of equity to the financing. Additionally, with currently about 2,400 euros net income from one salary excluding me (I hope to also contribute after the infant phase of our second child), we are actually liquid enough to cover the remaining financing. Unfortunately, my husband is self-employed – and only since a full financial year (pharmacy sector, so no uncertainties regarding the upcoming annual financial statements). Banks usually only grant loans after 3 completed financial years. But we do not want to wait that long: interest rates are currently great, plenty of equity, no rent at the moment (so we could build stress-free without double burden). Now my father has kindly offered to join the financing as a guarantor, but the banks refuse this as well: apparently guarantors are no longer accepted today, so my father would have to be included as a borrower. But if he is only included alongside my husband and me, then my father’s income is assessed as supporting a 5-person household (we have two children). His income is then insufficient. So, we have no choice but to have the entire financing run solely under my father’s name, gift him our equity, and after the financing is completed, my father would transfer the house to us by gift (or are there alternatives – maybe someone is familiar with this?).
Now we are wondering before buying the land whether we can simply purchase the land out of our own pockets and my father build our house on it with the rest of our equity and the debt, or if he should better already be the landowner? Otherwise, would there be problems? Could a division of the overall property like in a community of owners be considered? We have excellent creditworthiness, but the banks are putting plenty of obstacles in our way. Anyone have any advice?

Thanks and greetings from NRW

I hope you are not a male mutation that can bring children into the world :oops:

The whole thing is a bit wild.

Please provide more details about you, who is who, how old you are, what your background is, which bank rejected what and why exactly, who owns the property, etc...

I can't imagine that a bank would reject this financing with > 50% equity AND an additional guarantee (how valuable is it besides salary? Is there property/savings available?)

You have 2400 euros and are 3 people and the bank is not willing to release 150,000 EUR? Wrong bank. What does the house bank say? Or was that the house bank?

I am female... Login from my husband;)

I cannot imagine that a bank would reject this financing with > 50% equity AND an additional guarantee

...first of all, thank you for your response. Unfortunately, this is exactly the case. We were told both at the house bank and at a nationwide broker that the guarantee is initially a "phasing-out model" that banks probably no longer use today. Too many legal risks. At most, the father could be taken on as a co-borrower, which is the current common practice nowadays when a third party is needed for financing. The house bank was somewhat cooperative in that they still see a small chance to include my father, but they do not necessarily want to attribute the sole support of a family of five to him. They want to examine this now. The two large online brokers were out from the start as they told us they prefer "the so-called lean business“ without third parties with the sole borrower having a classic permanent employment salary, who then also stands alone in the land register.

Some more details about us:

Both 30, self-employed pharmacist, currently the above-mentioned income from freelance representations (tendency rising) and educational scientist on parental leave (currently no income except for the questionable stay-at-home bonus;), soon to expect 1000 net additionally), two children under 2.
My father has an income of about 2200 net, lives alone, owner of a debt-free condominium. Equity: 200,000. Loan requirement 150,000. The land does not yet belong to anyone because we do not want to make any mistakes. We could pay it in cash tomorrow. So far no financing commitment.

Okay, now it’s getting clearer.

One thing beforehand: This shows once again where the conditions at direct banks and intermediaries come from. No complicated business, because the effort is greater than the return.

It’s true that guarantees are rather unpopular, but that’s no reason not to use them. The legal framework for it is there. People just don’t feel like dealing with it. See above. Taking him as the borrower is ridiculous.

Whether you are the guarantor or the borrower... in case of emergency, you’re involved either way. But I think this should work without the far-fetched borrower construction and guarantee.

The killer argument against all objections from the bank must be: "0.0% risk – economically fully secured and you even have to be offered the best conditions on the table."

What type of bank does the house bank belong to? Your perfect financing partner should be a very specific cooperative bank with two professions in its name.

They know the industry more than very well.

I can understand that some banks are being difficult. If I understood correctly, your husband is a pharmacist who takes on temporary vacancies and has only been doing so for a year. That means there is no own pharmacy, no fixed salary, or similar. Your husband earns well if there are enough temporary assignments. However, if the economic situation worsens in the country, there will certainly not be as many offers because only sick cover for absences longer than 4 weeks will be ordered. Such a situation is by no means accepted by the bank as stable income. The bank sees this as a huge problem, which I can understand. They have already had numerous failures with this. You currently have no garnishable income. So despite your high equity, the future outlook is too uncertain for the banks. Most likely, only waiting until you have the required 3 years of tax returns with a clear upward trend and you are working again will help. Then it will work because the risk for the bank becomes more calculable.

Sylvia