Financing Monument Preservation on Heritable Lease

Hello everyone,

after I already received so much valuable feedback from my first inquiry, I would now like to ask for advice from this forum again.

We have postponed our desire for a new build due to low equity and very high land prices in our preferred area (350€/sqm). The plan was to save up equity properly over the next 3-5 years and then pick up the topic again.

However, we have now learned at short notice about a property that suits us very well.

It is a listed building from the 16th century that was converted into three residential units in 1980. The land is leased (Erbpacht) and belongs to the municipality. The ground lease contract still runs for 87 years.

The apartment (type terraced house) measures 170 sqm and is supposed to cost 375,000 euros. The ground lease amounts to 50€/month. I have already informed myself sufficiently about the advantages and disadvantages of ground lease.

We have now visited the apartment three times. Once with a friend who is an architect (specialized in monuments), who confirmed the value of the property and its good condition.

Currently, only the floor and the bathroom would need to be done (but only because we don't like the look). Purchase incidental costs (~25,000 euros since no broker) and renovation (25,000 euros) can be paid from equity. 370,000 euros would have to be financed. Income net currently is 6,300€/month without special payments. It is certain that the salary of both will still increase. We also already have one child.

We have had the utility bills shown for the last 5 years and also the energy certificate of the building. Everything fits. Minus our expenses, we can easily pay a credit rate of 1,700€ without having to restrict ourselves at all.

The property is very special, we know that. But that is exactly the reason why we like the apartment so much. Large gallery, open and spacious with intermediate floors, beautiful wooden beams, huge garden portion, enough rooms. A real alternative to a house for us.

Last week we were at the Sparkasse and they just gave us a rejection. Not because of our creditworthiness or equity, but the reason was that they know the property and do not finance it. From follow-up questions I could only hear that it has to do with the ground lease.

After the rejection from the Sparkasse I am now very uncertain. Do banks generally not finance something like that?
Besides us, 6 other interested parties have informed the seller of their purchase intention and are now clarifying financing.
This whole thing is making me very nervous right now.

We have an appointment with a broker tomorrow. We have all the documents together and are also the first who asked very precisely about them.

Is there anyone here with experience in such constellations of ground lease and monument protection? Do you know if it depends on the bank whether such things are financed? And does the review by the banks under such conditions possibly take longer than usual? Time certainly also plays a crucial role with the many interested parties.

In general, I would be grateful for all kinds of hints from you, whether positive or negative.
Many thanks in advance and kind regards
Anna

Normally, this is not a problem for banks, especially when they see your income.

Perhaps the Sparkasse knows the property too well and simply "doesn't like" it (bad experiences), or the internal valuation does not allow the financing you want (over 100%) - risk strategy of the Sparkasse.

Thank you very much for your feedback. It reassures me a bit that it's not generally a problem for the banks.

It's not really a >100% financing if we pay the additional costs entirely ourselves. Then it's exactly 100%. The advisor from the bank assured me that it is not because it's a full financing - she even offered that if we find another property, we should feel free to contact her again. I also assume that the bank knows the property. Although that does make me suspicious whether something might be fishy about the matter.

Brief info on the 100% lending: This always refers to the loan value determined by the bank. For simple/normal properties, it is usually roughly 10% less than the purchase price/costs. For more special properties (e.g., the architect-designed monument at AdW, collector's items), discounts of up to 50% can occur. So a luxury villa with acquisition costs of 1 million in the middle of nowhere = loan value 0.5 million (this is the value the bank expects in the context of the foreclosure and that a "normal" buyer is always willing to pay).

In relation to your property, this means that you want to finance more than the loan value - which is not necessarily a bad thing.

I have heard that banks are reluctant to finance real estate on which they have already lost money. Maybe the apartment or the entire house belongs to this type of property. Perhaps that is also why the city is once again the owner of these plots.