How to best approach a project when the existing house is the equity

What I still don’t quite understand is how the equity capital is supposed to work. The existing house belongs to the parents-in-law, right? So you have equity capital of 100,000 and the parents-in-law have the equivalent value of the existing house. Of course, they can already pass on the tax-free amount to their daughter (or you just pay inheritance tax), but how is that supposed to be reflected in the new house? Will the in-laws be listed in the land register or not? That needs to be clarified first. Because as I understand it now, that is the in-laws’ equity and not yours. And the bank will see it that way too. As long as the house is not sold, you can register a mortgage at most.

So I would sell, inherit the equivalent value to the daughter (or more or whatever) and you finance your house on your own for now. With that income, it should be possible. Short term (10 years) with the option of high special repayments. If the money is then available, you can contribute it via special repayments and pay the rest after the end of the loan.

Do the in-laws really want to give up everything? They give up any collateral – are they aware of that? If they are listed in the land register, then they can help pay off the loan with their equity (from the sold house). That would also allow for higher monthly payments.

There are many possibilities, work through them all. But at the moment you only have equity capital of 100,000. Or does your wife already own her parents’ house? And I would also clarify whether the in-laws really want to give up all their assets – if they realize that. So there won’t be trouble later on.

The existing house is to be contributed as "equity". It would be best to sell it beforehand, then we definitely know what we will get. But that will be difficult timing-wise, as the buyer probably won't want to wait until our new house is finished. If we arrange bridge financing and sell the existing house later, it is uncertain what we will actually get for it. Especially in the current times, no one knows where property prices are heading.

Do you already have a plot of land? And do you really have to sell the existing house given your income?

As soon as our renovation project was purchased, we sold another house. But I can only recommend this if the selling price does not dictate the budget – at the moment, the market is too uncertain for that.

Thank you very much for your tips so far.

So, the existing house will now be transferred to my wife in the form of a gift.
The parents-in-law will have lifetime residential rights in the new house and live rent-free.

At least that is the plan for now. They are aware that by doing this they are giving up their security.

We don’t have a plot yet, but we are currently searching meticulously.

The exemption amount for gifts from parents to children is currently €400,000; so the house exceeds that. You should consider whether to give away part now (namely the €400,000) and then the rest in 10 years. This way you avoid the tax (which applies to the rest and is a hefty 25%).

Also, the in-laws still keep something in hand.

And on the subject of residential rights. That is already quite good, but a usufruct right is much safer and more extensive.

And on the subject of residential rights. That is already quite good, but a usufructuary right is much more secure and extensive.

However, for a bank it is probably no longer financeable. At least if such a right is registered with priority - if it is subordinate, it no longer has any value for the entitled party...
Such a right is a double-edged sword.