Is purchasing a house and complete renovation affordable?

With a loan installment of 2,300 EUR, plus additional costs, plus 2 cars... that's still enough for the Baltic Sea or Mallorca. Add 2 kids, and there’s no money left for any vacation at all. We have a similar income, but half the installment. It’s enough for a good life, no question. But we definitely don’t face the choice "Ischgl or St. Tropez?" or "5 Series or E-Class?" It’s no coincidence that the bank allows a maximum(!) of 40% of net income for the loan.

Our bank says that minimum living expenses plus a small buffer must be covered. According to the bank, we could easily go over 40%. So your statement is not entirely correct in general.

In my eyes, it's not about gladly giving up luxury like vacations in exchange for having a nice house. I'm totally on board with that. The calculation is also not about always providing everything for your children. From my perspective, it's about having enough money for security. A margin and a cushion that allow you to keep the house and reorganize your life if, for example, a partner only receives sickness benefits or a pension, or as in our case, a child needs therapy for a while after an accident that was not covered by insurance. Or if you need and want to financially support your parents with care. Perhaps I'm wired differently because I've experienced some misfortunes in my family and circle of friends that clearly showed me that you need reserves when you have children and shouldn't live paycheck to paycheck. We have arranged everything so that we or at least the children will always have a home and the necessities to live. Despite the installments for the house, we still set aside money every month. One part as a repair fund and another part as a safety reserve and retirement provision. Before the children, I was more of the type "live for today and let the flood come after me." That changed with the first child. And again with Covid.

I simply think that a life only for the house is not a happy life. To give up vacations, hobbies, and leisure trips to finance a house. No thanks. It is better to leave it or build 15 sqm smaller. And if one of the two borrowers has an accident, a long illness, or dies, then the dream of the house is completely over.

The other question is, do I want to align everything to contingencies? If a stroke of fate should come, you just have to part with the house then. But not tackling that beforehand, I consider to be wrong.

The other question is, do I want to align everything to eventualities? If a stroke of fate should occur, you just have to part with the house then. But not tackling this beforehand, I consider wrong.

I see it the same way. If everyone considered every possible thing, hardly anyone could build or buy a house. The OP here is a civil servant, meaning he can also expect (effortless) step increases in the coming years. And there is also a subsidy for each child.

The issue with collateral is basically correct, but the question is whether buying might be the right way to go. €1500 rent is not a small amount and it certainly won’t get better in the coming years. In the medium term, there is little left to save compared to the house. And in the end, you don’t build any wealth with rent to secure yourself. Anyway... what does securing even mean? The crux is that with moderately profitable investments you always have a risk, but that’s precisely what you don’t want when you’re trying to protect yourself against unfavorable situations. Unemployment often comes together with a poor stock market development. Misfortunes also don’t wait until the timing is right. On the other hand, you also can’t leave unlimited money lying around in a savings account, as you almost never achieve the inflation rate as an interest rate and after taxes, that’s a guaranteed loss.