Best option for short-term land financing

Hello everyone,

the following scenario:
We would first like to buy a plot of land and then calmly take care of house planning, building permit + further saving of equity.
Now there is a bit of a question as to which financing option would be the most sensible for us.

From 2 different brokers, I initially received the following variants:
(1) Variable loan: 6.62%
(2) Fixed interest rate 1 year: 6.28%
(3) Fixed interest rate 2 years: 5.09%
(4) Fixed interest rate 3 years: 4.87%
(5) Fixed interest rate 4 years: 3.71%
(6) Fixed interest rate 5 years: 3.62%

All offers include a repayment rate of 1-1.5%.

The interest rate for the variable loan + 1-year fixed interest rate seems disproportionately high to me.
Conversely, we could then, of course, only start building after at least 2 years.
Is it ultimately a trade-off between flexibility for the start of construction and the interest costs between 2-5 years?

Could it make sense, for example, to take out a 5-year loan with a reputable bank with the theoretical option to also negotiate financing for the house with this bank during the term?

Of course, we also have the goal to build as soon as possible, since otherwise we would pay rent for a long time + additionally finance the plot of land.
What do you think? Are there any alternatives?

Best regards!

1. Interest also depends on the loan amount 2. Loan-to-value ratio? 3. inverse yield curve = short-term loans are more expensive than long-term ones 4. variable interest rate is good 5. what is suitable in the end is up to you. How long does the property actually need to be financed? 6. 5 years is rather bad, as you are tied to your bank then if you want to build in two years. Or a prepayment penalty is due (but there is no right to terminate, the bank can also refuse this - more theoretical than practical)

And honestly? Who seriously cares about the interest rate for variable up to two years. Calculate the differences in € and put it in relation to the total investment. For that, you have maximum flexibility.

And honestly? Who seriously cares about the interest rate for variable up to two years. Just calculate the difference in € and put it in relation to the total investment. For that, you have maximum flexibility.

I'll put it this way: if, for whatever reasons, we only start building in 2 years, we would have paid about €10,500 additional interest costs with the variable loan and also still bear the interest rate change risk (which, of course, can also be positive).

Regarding the option to start building the house before the fixed interest period expires, I was thinking more about already taking out the land loan today at the Commerzbank or ING and then hopefully refinancing the house at reasonably fair conditions as Plan B.
Plan A, of course, remains to refinance everything at once after the fixed interest period ends.

I'll put it this way: if, for whatever reasons, we only start construction in two years, we would have paid about €10.5k additional interest costs on the variable loan and still have the interest rate risk (which of course can also be positive).

Yes. With about €170k loan. But if you build in two years, you get a bad interest rate for the construction loan (the first rank is still blocked). That could be 0.20% or whatever and will eat up everything over time again.
If you're sure you want to wait that long, then you should work differently from the start. 5 years fixed with maximum repayment = building up equity.

If you want to build in two years ==> finance accordingly with a maximum commitment of two years
If you want to build in five years, then of course a five-year commitment.

And what about putting all existing equity into the property purchase now? It would be a good return on equity and might keep the loan very small. Paid-off property counts later as equity for the mortgage loan as well.

And what about putting all existing equity into the land purchase now? That would be a good return on equity and might keep the loan very small. Paid land later also counts as equity for the mortgage loan.

There is nothing against that and I will do it that way, especially with interest rates > 4%. However, the land price exceeds the equity significantly. This is also one of the reasons to wait a little longer with the house construction, which recommends a waiting period of >= 2 years.

How is that actually valued as equity in a later financing? Equity = purchase price minus remaining debt or equity = market value (on date X) minus remaining debt?