Which of the two options is better?

(Wohn)riester (with children and big subsidies) just let it run loosely alongside. Then later it will be either retirement provision or renovation... Do not firmly include it in the mortgage financing.

Exactly, combine building savings contract and KFW.

Can you make special repayments on the long loan or adjust the installment accordingly? Otherwise, it won’t work out with "putting the installment in there."

5% special repayment, i.e. €7,500, per year is possible.