Not paying off the house - dumb or sensible?

Better to play it safe and not have to count every penny. Never speculate on future events. So, clearly buy. Friends of my parents were done by 62. Never went on vacation, always tinkering with the new house. The house is now 25 years old. They talk about finally “living” at 62 .... OKAY

I wouldn't take on too much either. Although the slogan "House must be paid off by retirement" no longer fits today's world. It comes from the post-war period, and the market has changed radically since then.

Our parents have houses that are largely paid off; so we might eventually inherit to pay off the remaining debt. Conversely: If one planned without any remaining debt and the inheritance actually came, one would have a pile of money but not the house one always wanted.

That sounds nice, but even if the parents are already 70 or 80 years old today, one cannot necessarily assume that the inheritance will come within the next 20 years of one's own financing, especially not in what amount.

Our plan is anyway to sell the house in old age and then downsize. Either to rent or even towards the south. We have two very good examples in our closer circle of acquaintances. Both live very well and feel comfortable.

So build and finance now in a way that fits, even if it is not paid off by 65 or 67, but you live well now and have reserves in old age.

One can also take the parents' circumstances into account. Mine have secured themselves in such a way that even if both parents have to go into full-time care at 100%, the monthly income is still higher than the cost of care (after deducting the care allowance). Of course, when repaying a loan, one should never factor in an inheritance but rather unfortunately see it as a consolation.

First of all, many thanks to all of you for all the answers and your thoughts!! Of course, I knew that I wouldn’t get 20 times "go for it" from 20 people here - I wanted exactly these different thoughts that have now come in

On the topic of inheritance:
If everything were based on inheritance, I would say that this is not good. But I also have approaches for the case that at retirement there is no inheritance and none is coming anymore (selling, renting, servicing interest-only payments, ...). So I also see it very clearly: if an inheritance comes, great – but plans should not be solely based on that!

On the topic of the bank:
We have no problems there. On the one hand, we have good and secure jobs (my wife is even very secure as a civil servant). On the other hand, we are allowed to mortgage the houses of our parents (children of divorced parents, so 4 houses – of course not all alone), so that in total we have a decent loan-to-value ratio. We were welcomed with open arms at past inquiries

But the most important question for me is actually: What does "being able to afford something" refer to?
Can you only afford a house if you have paid it off by retirement? Or can you already afford a house if you can afford the installment from interest and a minimum amount of repayment?
Let’s consider the following three options:

[*]Renting for €1000,
in the end you own nothing and can be kicked out anytime due to owner’s own use. Improvements and enhancements to the apartment are not done (except decoration) because you don’t own it
[*]Buying a small house with an installment of €1500, which is paid off by retirement (assumed purchase price €400,000)
[*]Buying a house with a bigger garden with an installment of €1500, which still has a remaining debt of €200,000 at retirement (assumed purchase price €600,000)

If I now think about retirement in the case without inheritance:

[*]You have to invest the saved €500 well compared to buying a house, because covering rent solely from retirement income is tight
[*]You live "rent-free", possibly you sell the house and then have €400,000 in cash
[*]To continue living there, you at least have to cover the interest, for example at 2% interest €330 per month, possibly you also sell and then have €400,000 in cash (neglecting that during financing you had to pay more interest than at 2% and therefore could repay less). Or if you actually inherit something at some point, you pay off the house.

And the other important question: To what extent is the risk lower with a smaller house?
If I cannot pay my installment, I have to sell in both cases (2 and 3). In my understanding, it is more important that a purchased house has an appropriate market value and is located in an area where demand is high and therefore the market exists. In this respect, the risk is actually much greater if I buy a cheaper house in the countryside because I possibly won’t be able to sell it as well in 20 years (based on the assumption that demand in cities has continued over the last 50 years).
Equally important is not to overextend oneself with the installment - so it’s better to have a remaining debt in the end and have lived a good life until then than to pay a high installment at all costs and miss out on life. But this applies equally to expensive and cheaper houses.

On the topic of installment / predicting the future:
That the current parental leave will end is certain for me – whether my wife and I can and want to work 100% later, on the other hand, is something I would not fully rely on, exactly.

Thanks again for your participation in the discussion – it helps me a lot to better evaluate my arguments. It is not about finding a universally suitable approach for all people here

P.S.: The parents are all civil servants and have provided relatively well for their old age.