Is it feasible to buy a second house with a mortgage on the first house?

Hello everyone,

I am Christoph and have a question about the feasibility/sense of the following project:

Me: 42 years old / currently only employed on a 520€ basis (changing to part-time from October)

Wife: 38 years old / part-time employed
Child: 3 years old and full-time busy keeping us on our toes.

Income: currently 2200€ (total)
From October: 3500€

We already "own" a single-family house, or rather still have to pay off 82,000€ of it. Fixed interest rate for another 16 years (1.05%).
Monthly installment 400€

Other debts: none

Why we currently work so little has health reasons. However, things are now moving in the right direction again and the future looks great.

The fact is that we manage with the currently available monthly income and our expenses. However, currently nothing is left over. Understandable. (I still have some equity, from which we finance our holidays, etc. I do not want to include this reserve in the calculation.

Now it is so that we have received an offer from relatives to buy a nice semi-detached house at a very "fair" price (250,000€). The condition, however, is that the relatives retain lifelong residential rights. (He is 87 and she is 84 and thankfully both are still in very good shape).
The value of the house is at least about 450,000€. (according to a real estate agency in 2024).

We would like to buy the house and after the relatives eventually no longer "want" to live there, rent it out accordingly.

Now the question is how best to go about this.

From October I will slowly start again at the old job. Then we will have 1300€ more available than now. 6 months later it should go back to full-time. But I do not want to take that into account right now.

What financing structure makes the most sense here?

Mortgage on our own house with corresponding monthly repayment? We could then pay off about 1000€ for some time and when the relatives no longer "want", have the then adjusted rate paid by the tenants?!

By the way, the house is in very good condition and no work is pending. (Built in 1998).

Maybe someone has a suggestion that fits our current life circumstances?

Wishing everyone a good start to the weekend.

What value does your existing house have?
For me, considering income and health, it is a very shaky construct; I would probably keep my hands off it...

What is the value of your existing house?
For me, considering income and health, it is a very shaky construct; I would probably stay away from it...

Our house or rather the land has a value, according to the real estate agent, of €400,000. It is almost 3,000 sqm and very well located. The house is small and old. But it is enough for us.

Yes, the health issue is indeed a tricky matter...
That's why I want to approach the matter as carefully as possible.

Now there's nothing left, so how is the second loan supposed to be serviced?

1. Lifetime right of residence = no rent from the new house
2. Thanks to the age of the entitled persons, a bank still gets a decent loan value. In my opinion, a loan there is not a problem at all on the new house (regarding security for the bank)
3. 250k financing with 5% interest/repayment is currently about 1,000€ per month rate
4. You have to convincingly prove to the bank that you have the new job/part-time position or, preferably, that the income is coming in
5. With then 2,200€ net monthly, the bank calculates about 1,700€ living expenses (this is how we do it too, it approaches poverty risk and garnishment exemption limits)
6. Conclusion: No bank will give you a pawnshop loan that everyone knows cannot be serviced. Even no bank in Germany is allowed to do that. For that, you are too "poor". Sorry, but you can forget about the financing.

Apart from that, you might have to pay a considerable amount of gift tax. No idea how the lifelong right of residence would be taken into account, but the gift tax exemption limits are small and 200 thousand waiver is a significant amount (you can live in it for a long time).