Bridge financing for land purchase

Hello everyone,

the following situation: we would like to build a house and now have the opportunity to buy a suitable plot of land. The municipality wants to process the purchase quickly and therefore the purchase price would be due shortly. However, by that time, we probably will not have made a final decision on a construction company and therefore will not yet have the final offer in hand. The approximate scope is of course already sufficiently known. However, this means that when the purchase price for the land is due, we will not yet be able to finalize the financing (for the land plus house).

The available equity is not quite sufficient for the complete purchase of the land - we are missing several tens of thousands of euros. We would therefore need to somehow bridge this amount x now in order to initially buy the land and then pay it off in a few months with the final financing.

It is of course possible to temporarily finance the amount x through a variable short-term loan with a bank. Alternatively, this amount could also be made available on a short-term basis by the family. If I now discuss the financing of the house construction with the bank based on the construction costs y, the bank would still have to disburse the amount y + x so that I can pay for the house construction and repay the interim financing (bank or family).

The following questions arise for me now:

[*]Does the bank disburse an amount that is higher than the construction costs?
[*]How does the disbursement work, since I obviously cannot provide an invoice for the interim financed amount?
[*]Is interim financing through a bank or through the family more sensible? Are there more advantages/disadvantages on either side?
[*]If interim financing is through a bank, is it best with the bank that will also handle the final loan or perhaps not that one?
[*]Does this approach carry any risks that I might have overlooked and it would be absolutely advisable to somehow process both simultaneously?

[*]Is there perhaps another elegant solution for this situation?

Thank you very much in advance for your answers!

Best regards
jethy

Hello,

a possible alternative is the bridge financing. I see the problem that you get poor conditions for the purchase and bind yourself to a bank too early.

Handle the whole thing simply with a variable interest rate. Maybe slightly worse terms than with a fixed-rate loan, but repayable at any time through "den großen Kredit". We solved it that way.