ᐅ House: Extension, Renovation, Modernization, and Takeover – How to Proceed?

Hello everyone,

I have already searched extensively but couldn’t find a case that fully fits my situation. That’s why I’m starting a new thread here in the hope of getting some advice.

The situation:
My wife and I are currently living with our child in my parents’ house. The house is a two-family home with two identical residential units, one on the ground floor and one on the upper floor. It has a full basement and a partially finished attic. The current value is around 300,000-350,000 euros, depending on who you ask. But the scale should be about right.
My parents have not yet fully paid off the house, so there is still an outstanding mortgage of about 100,000 euros, but at a very favorable interest rate that would not be available today. The fixed interest rate term runs until 2030.

The plan now is to build an extension, remodel certain parts of the existing building (move walls, relocate the staircase, etc.), and of course modernize it. As part of this, the house and property are to be transferred to me by gift, to later reduce administrative effort (I have no siblings). My wife and I will cover the costs for the extension, remodeling, and modernization. The ground floor, upper floor, and attic would then form one residential unit for me and my family. My parents would move into the newly created basement apartment. Both residential units would have completely separate entrances and would not be connected internally.

We have already spoken to the bank, and the recommendation was to keep the existing mortgage and continue having my parents make the payments. A gift transfer is not a problem, and the construction changes are also possible under this arrangement.

What we have done so far:
- Architectural plans created
- Preliminary structural engineer review conducted
- Current site plan prepared
- Discussion with the bank; documents submitted for financing review

What still needs to be done or is not yet in place:
- Financing commitment from the bank
- Submit the building permit / planning permission application
- Complete the gift transfer

According to our contact person at the bank, at present only building permit / planning permission applications with secured financing are accepted. However, he also requires more or less a confirmation from the municipality that the project will be approved. This seems like a bit of a chicken-and-egg problem, at least in my view. The planned gift transfer probably adds some complexity here.

Now to my questions...

• In what order should we proceed?
• Is there anything to consider regarding the gift transfer under the given conditions and plans?
• Who are the right contacts for these matters?
• Has anyone experienced a similar case and can share some insights?

Thank you in advance for your support.

Best regards

mikobokim schrieb:

We have already spoken with the bank, and they recommended keeping the current loan and continuing to have my parents repay it. A gift transfer is still not an issue, and the structural changes are possible within this arrangement.

You can also take over the loan if the bank agrees. From the parents’ perspective, I wouldn’t give up the house and keep the debt.

mikobokim schrieb:

According to our contact at the bank, currently only building permit applications with secured financing are accepted. However, they also basically need approval from the city that the building project will be authorized. A bit of a chicken-and-egg problem, at least from my interpretation. The planned gift transfer probably adds some extra complexity here.

Was your contact at the bank a trainee? That makes no sense—if building rights exist, you can submit a building permit application, and it will be approved. No debates, period. That’s final. Also, the bank does not need a building permit for the loan approval. They need a plan and a cost estimate or your loan request. Of course, for the loan payout, a building permit is mandatory.
==> Talk to someone at the bank who knows what they’re doing. It’s completely normal that a building permit is not required before the loan approval—just like there doesn’t have to be a purchase contract for a finished property before financing. Worst case, the house cannot be renovated, and you have to pay the bank a so-called “non-acceptance compensation” if you don’t take the loan.

mikobokim schrieb:

Now for my questions...

• What sequence of steps should we follow?
• Is there anything to consider regarding a gift transfer under the given conditions and plans?
• Who are the right contacts for such matters?
• Has anyone had a similar case and could share some experience?

1. Submit the building permit application
2. Secure the financing and, if possible, take over the parents’ financing (this is called debtor substitution)
3. Visit the notary and discuss the gift transfer—make the gift before the new construction to keep the declared value low and avoid any disputes
4. Discuss further steps with the architect or site manager, etc. (tendering, general contractor search)
5. Start building once the building permit is issued