Real estate loan with high collateral but low ongoing income

Does a low income play a role in the granting of a loan/interest rate if the loan is more than sufficiently secured (overcollateralized)?

The interest rate is primarily determined by the value of the collateral. You should be able to expect a reasonable interest rate.

BUT: The question of whether you can get a loan at all and repay it is only to a very small extent based on the value of the collateral, but mainly on your ability to service the debt. The bank has no interest in relying solely on your properties if it knows exactly that you cannot actually repay the loan from your income. However, every bank calculates differently what is considered income and to what extent.

For example, with us (although as a commercial customer) you would have to be able to service an annuity of at least 6.05% for residential property—regardless of the actual interest rate. Thus, with us, there would be a clear rejection after a few minutes of consultation. Other banks think differently.

First of all, a bit more detail about my plan:
I do not want to hold this newly purchased property permanently and pay off the entire loan over decades. Rather, the intended holding period is about 7 years (which is roughly when the fixed interest period of the 1st loan expires), and then I want to sell the newly purchased property again in order to fully repay the new loan to be taken out as well as to use the remaining amount to repay a significant portion of the 1st loan.

Regarding the question of the ability to service the ongoing loan installments:

Of course, the bank must be assured that the ongoing loan installment can always be paid (or at least must be able to assume this).
It is true that my current ongoing pension income is by far not sufficient to cover the loan installments. However, this is not necessary at all for various reasons:

1.
I know someone who has about €5 million in loan debt (with maybe about €6 million in property value); he pays more than €15,000 monthly in loan installments on a salaried income (not civil servant) of about €4,000. So a statement that the loan installment must be covered purely from current income would definitely be false.
Rental income, just like income from capital (dividend income, interest income, etc.), as well as employment/pension income must be considered for monthly income; that is undisputed. I am aware that banks usually apply a rate of 80% when taking rental income into account (please correct me if another percentage is commonly used). This 80% is also roughly what remains to me after deducting operating costs (repairs, vacancy, etc.) to pay the loan installment. So for me, this is roughly a real zero-sum game (from a liquidity perspective), although it does not yet consider that rents are likely to increase in the future and loan interest rates are fixed, so there is tendentially additional income generated from this rental activity, and this AFTER the risk deduction.

2.
As I mentioned at the beginning, this entire loan uptake is limited to about 7 years on my part. (It can be written into the contract that the property must be sold within 7 years; as mentioned, even if such a clause were not in the contract, I would still sell this property again after about 7 years).
From my reserves, I could easily cover the loan installment payments over 7 years and would still have enough to live on during this time - even if I received no pension/salary at all. However, I do receive either the pension or, if health improves, a higher employment income. (Of course, it is theoretically possible that one does not find employment or is dismissed, etc., but that can basically happen to anyone (not a civil servant).
If necessary, I could deposit an amount X with the bank to secure the ongoing loan installments, which I would then not be able to access.
Accordingly, the continuous servicing of loan installments IS IN FACT DEFINITELY secured.

What is unclear to me:
What does it MEAN CONCRETELY for a bank that the loan repayments are secured? There should be exact regulations for this, with specific figures and ratios that can be calculated.
Are there regulatory banking guidelines/rules that include a clause stipulating that employment income/pension income must make up x% of the loan installment?
Because if this is not the case, I cannot see why a loan approval by the bank would not be possible.

I want to take out the loan at the bank where I already took out the 1st loan; I just need to be very well prepared for a conversation with them and know the CONCRETE banking guidelines, which I unfortunately do not really know at the moment.

I repeat my question 2 from the 1st posting:
Will I be asked again about my salary statements when applying for a loan again at the same bank?

:
I am not self-employed. What is the situation for a private customer?

:
I cannot find a forum at Immocation. Is there one there?

: I can't find a forum at Immocation. Is there one there?

There is a Facebook group for it. Sometimes they also have regular meetups. The people there all do it as an investment. 7 years is an unfavorable holding period. If under 10 years, you have to pay tax on the profit from the sale.

You assume that prices will rise in 7 years and that you can benefit from it, but what if in 7 years it looks the other way around?

One has to start from some assumptions. With investments, you theoretically always have the risk that in the end you have less than before. If you put €100,000 in the bank, it will be worth less in 10 years than it is today. No one has a crystal ball.

I know someone who has about €5 million in loan debt (with maybe about €6 million in real estate collateral); he pays over €15,000 per month in loan installments with an employee salary (not civil servant) of about €4,000. So a statement that the loan installment must be covered solely from current income would definitely be wrong.

No one claimed that either. You just have to be able to afford the loan – that’s all.

I know that banks generally apply a rate of 80% when taking rental income into account

Correct

As I mentioned at the beginning, this whole loan is limited from my side to about 7 years. (It can gladly be written into the contract that the property must be sold within 7 years; as I said, even if such a clause were not included in the contract, I would still sell the property after about 7 years).

Such a clause is against good morals. The bank does not care about that either. Please note capital gains tax.

From my reserves, I could easily cover the loan installments over 7 years and would still have enough to live on during this time – even if I received absolutely no pension/salary.

I say you could go to the casino on the weekend and your reserves would be gone… That’s also what the bank says. Alternatively, provide as collateral.

What does it CONCRETELY mean for a bank that the loan installment payment is secured? There would have to be exact regulations with concrete numbers and ratios that can be calculated. Are there clauses in regulatory banking guidelines/regulations that say that employment income/pension income must make up x% of the installment?

No, there are no concrete requirements. I have told you ours. According to that, you would not be serviceable and thus not creditworthy with us. But every bank looks at it according to its own guidelines. Therefore, there is no ONE answer here.

I want to take out the loan at the bank where I previously took out the first loan; I just have to be very well prepared for a conversation with them and know the CONCRETE banking guidelines, which I unfortunately do not really know at the moment.

Only your bank can tell you those.

I repeat my question 2 from the 1st post: Will I be asked for my salary statements again when applying for a new loan at the same bank?

YES! That is part of the review according to §18 KWG.

: I am not commercial. What does the situation look like for a private customer?

As I know it, for private customers, after the fixed interest period expires, a correspondingly high annuity (e.g., 6%) must be affordable. So if you currently have low interest rates and low repayments on your loans, it would probably look bad then... You have to calculate that yourself.