Uncertain due to financing

Hello,

we are considering buying a plot of land from the city and building a house there. The building plot is in a prime location. We are in our early 40s and have €40,000 in equity. The loan amount would be around €360,000. We probably won't be able to fully repay the loan by retirement due to the short term, even though we earn quite well. We are now considering an option with a low repayment rate to keep the installments affordable and then sell the house again after 20 - 25 years. The plan is to buy a small age-appropriate condominium afterwards. How much risk do you see in this plan? What is the likelihood of getting out of the whole thing with debt? Or maybe with a small profit. I think no one can predict how house prices will be in 20 years.

Thank you very much for your opinions.

I hardly believe that the bank will play along in the scenario and agree to a lower rate, because the risk for the bank is then significantly higher. Moreover, no one can say what things will look like in 20 years. And buying or building a property to sell it again after 20 years, I do not consider a good idea. Renting would be a better option and the capital would not be tied up.

According to our financial advisor, the financing would be possible. We assumed a repayment rate of 1%.

With a high income, I do think that banks will go along with it, why not, it's not an unusual situation. Paying off less than you can easily manage, however, I consider not sensible. That way you pay more interest than necessary, which you cannot recover through a sale.

I hardly believe that the bank will go along with the scenario and agree to a lower rate, because the risk for the bank is then significantly higher. Besides, no one can say how things will look in 20 years.

Why shouldn't the bank go along with this? It even increases the profit (possibly interest surcharge and higher loan amounts to accrue interest).
With us, the bank agreed without any problems. The only difference with us is that we only agreed on the minimum repayment to maintain maximum flexibility in an emergency (and really only then), but internally (i.e. for us) we always set money aside to reach our 6% annuity with annual special repayments. As I said – for us, this is the security for emergencies.
By the way, the bank did not know at the time of approval that we planned annual special repayments – everything was handled through a financial advisor.
How well the plan with the subsequent sale of the house works depends entirely on the area where the house is built.
You are building in Hesse. If you are near FFM, it should work without problems – in more rural areas like e.g. Alsfeld (so further away from the commuter belt) it might possibly be more difficult.
If you were building in the countryside in Saxony-Anhalt, your plan would currently probably be doomed to fail.
You can probably best assess your area as well as the chances of a resale yourself.

I don't think it makes sense to repay less than you can easily afford. That way you pay more interest than necessary, which you can no longer recover through a sale.

Here I agree with . With investments, you often do not get a corresponding (100% secure) yield that offsets the interest you have to pay. Possibly you should work with special repayments here (like we do) – but then consistently.

What does "earning well" mean? 40,000 in equity is not that generous at the beginning of your 40s. If you have lived well and saved little so far, can you restrict yourself when buying a house?

At the beginning of your 40s, I assume that family planning is mostly completed.

You should, however, calculate with 4% repayment, then you will be done in about 21 years. But selling the house with outstanding debt at 60+ is not worth it.