Is construction financing possible? Please provide assessments.

We requested a 550k€ loan with a 3.5k€ net Hamburg income (however, with a strong upward trend, although this is hardly/no accounted for), 3 out of 4 banks approved us without any problems (regional+online). We are also young and will pay it off until retirement. It has now become common practice, partly even to finance over 50 years. I myself was a construction financier for several years and this occurred more and more frequently.

When I read in some topics here that a 550k€ loan is discouraged with a 5k€ net income, I am very surprised. Then as a bank we would never have been able to grant loans. Here in the high-price area, even with a lot of equity, hardly any construction is possible under that amount, and maybe only one in 50 has that net income.

And you don't see any differences between you and the OP? The OP does not live in Hamburg, Munich or similar and is not particularly young anymore. Besides, the OP wants not just 550, but much more.

We requested a €550k loan with a net Hamburg income of €3,500 (although this is strongly increasing, which is hardly/ not at all taken into account), 3 out of 4 banks approved us without any problems (regional + online).

The actual approval probably comes rather after the loan application. Then there will also be the corresponding equity available. And even if you find a bank – with a 10-year fixed interest rate and hardly any repayment, so that it is at all feasible. In 10 years, the ultimate test will come.

It is now common practice, partly even financed over more than 50 years. I myself was a construction financier for several years and it happened more and more often.

Just because the bank agrees to it or others do it, does not by any means mean it is a good idea to finance your own home over 40 or 50 years. Regardless of whether it is a high-price region or not. The problem with such long-term financing is that you make the bank your landlord since almost the entire installment goes into the interest and hardly any principal is repaid. Accordingly, after 15 or 20 years there is still a large outstanding debt. I quickly put that into a calculator, more than 80% of the debt is still there after 20 years. The high remaining debt then exposes you excessively to interest rate and value risk. Neither interest rates nor house prices are one-way streets, and the demographics will develop unfavorably for the real estate market in the coming years. Currently, the baby boomers and their children each have a household. In 20 years many of the baby boomers will no longer be alive. Some locations may be able to compensate for that, most will not. And it is difficult to know beforehand which these are. If you then have to conclude the follow-up financing at 5-6% and the house is worth 15% less than originally, then that is a problem. In addition…a house ages and requires maintenance. During the long loan term you then have (possibly multiple times) a new heating system, windows, new kitchen, bathrooms, possibly facade or roof. I have looked at enough houses where the owners did not have the money to maintain their house. In short: there are good reasons to limit construction financing to 20-25 years and also the necessary share of income. Those who finance significantly beyond that enter into a highly leveraged bet on further rising prices and high inflation. Whereas the latter also makes maintenance more expensive again and works against you.

I do not want to deny any of that, it was not directed at the OP, rather to be understood as a prompt. I do not think it is good either, but that is how it is with [Kreditwesen].

I would definitely renovate the basement (not with paint :-) ). 140 sqm basement? What useful purpose is it supposed to serve? The parents-in-law will probably get a 50-70 sqm granny flat, leaving you with 180 - 200 sqm of living space. That's already quite a lot for 4 people. And you don't exactly belong to the wealthy of the country. And comparisons like the friend of a friend did this or that are quite difficult for outsiders to evaluate. The friend of a friend might work independently in the construction industry and thus get purchase prices, or simply take 6 months off due to good equity, which you can hardly do. Never assume what others do, but what you can do.

Building a 250 sqm house without a basement will already be a challenge:
- 250 * €2,500 (probably more) = €625,000
- €60,000 incidental construction costs
- Outdoor facilities, furniture, kitchen: €50,000

Minus the equity and the €200,000 from the parents-in-law, you are still looking at a €500,000 loan.