Not paying off the house - dumb or sensible?

And you will have to convince the bank. As long as the bank cooperates, everything is allowed

Let's take an example:
- New build + plot: €550,000
- Incidental purchase costs and €50,000 equity contributed
- €500,000 loan
- Net household income for a family with 2 children: €4,500

I chose the income relatively low in this example because the property is comparatively more expensive. Hopefully, this corresponds to the desired scenario of "building bigger" without repayment.

I would initially leave out pledging other people's properties as brought up by the original poster.

So: Can one actually find a bank for such a case offering a loan with 1% repayment or even less?

Is there really a bank that offers a loan with 1% repayment or even less in such a case?

I had an offer with 1.6% repayment and a term that extended about 10 years into retirement. Yes, I would guess you can find a bank. Maybe not at 1%, but definitely below 2%...

Doesn't one pay high interest in such a case?

Our initial repayment rate is 1.3%, loan amount 280,000 euros, fixed interest period 30 years at 1.34%. Whether more would have been possible, I do not know.

Do you not pay high interest in such a case?

Interest was 2.3%, November 2018, 95% loan-to-value. At that time it was a "normal" (not super cheap, but also not outrageously expensive) interest rate, today it would certainly be about 1% cheaper soon.

So: Is it really possible to find a bank for such a case that offers a loan with 1% amortization or even less?

What speaks against it? A 130% loan-to-value ratio at mid-50s will of course not work.