Fear of a construction loan - in an extreme case, still no problem, right?

Hello everyone,
we are currently planning a construction project and the loan amount is giving me quite a headache. I don't even want to address the usual question of whether you can afford it. My consideration is more about what happens in a worst-case scenario when you can no longer afford the installment at some point. At the moment it fits, but who knows what the future holds.
Here is an example: total construction costs 600,000, equity 200,000, loan 400,000

If I am forced to sell after two years and can sell the house again for 600,000, then I pay off the loan and have also recovered a large part of the equity, so I am not completely penniless. Or am I seeing that wrong? Sure, one-time costs like agent fees and property transfer tax are sunk. But as long as real estate prices remain stable, I don't have to fear the loan, or do you see it differently?

That's exactly right. Even if the market crashes, you will be free of the debt. That's the difference compared to consumer loans; the value of the house stands against the debt. A high equity ratio reduces the risk for the bank and for you. It is important, if the loan can really no longer be serviced, to talk to the bank and aim for a sale, possibly even through the bank. A forced auction is always the worst choice. It is even more advantageous if you then have 6 times the monthly costs in your account. That allows you to buy time until the sale.

You must also expect a prepayment penalty when selling due to early repayment of the loan. If you find yourself in an extreme situation, always talk to the bank in time. It is a myth that a bank is happy to foreclose on real estate.

My consideration is rather what happens in a serious case, when you can no longer afford the rate at some point. Currently it fits, but who knows what the future holds.

Then the house is your least problem. In normal cases, you then have an equally big problem in the rental apartment. Unless you calculate it so tightly from the start that it actually cannot work. But you still want to have the house.

You also have to reckon with a prepayment penalty when selling due to early repayment of the loan. If you find yourself in an extreme situation, always talk to the bank in time. It is a myth that a bank is happy to foreclose on real estate.

If the bank itself brokers real estate, you can (informally) agree with them that they receive the brokerage mandate and that the commission earned is at least partially credited against the prepayment penalty.

One would first have to consider what event could occur that would require a sale after only two years.

Health and death can be insured against. Unemployment would be unfortunate, but one will find a new job. It's not about infinitely large sums, but about a very normal single-family house and a "small" to medium-sized loan. Personally, I would not worry at all.

Well, the biggest risk actually remains separation, divorce, and alimony. A classic that, with normal incomes, should always end in the sale of the house. If that already seems realistic in two years, then better no joint property. I don't assume that.

But no matter what happens, with so much equity involved, no debts remain. Including additional purchase costs, prepayment penalties, maybe even a loss in the property's value—if things go really badly, one can expect to lose €100,000. But for that, you have lived well for two years. With an increase in value, you might even get more out of it, and if it is only sold after 10 years, there is no prepayment penalty.

All in all: Sleep peacefully :)