Buying land without knowing what the house costs?

Hey
we are currently thinking about building.
We have been looking for plots for quite some time and have also found one that might fit.
But before we get in touch with the seller, I wanted to know the following so I don’t embarrass myself:

I’m not quite sure how the whole process is supposed to work: if I like the plot and want to buy it, then I would first have to go to the bank and ask if they would even give us a loan. But the bank wants all the documents including construction costs. For these construction cost documents, I would have to have the house planned specifically for this plot (slope location).
But I can’t have a house planned for a plot that I don’t even know if I will get.
Something like that also takes weeks, no one will hold a plot for me that long, right?
I assume there are more interested parties, the seller surely won’t want to reserve a super cheap plot (and we can’t afford anything else) for weeks...
And you probably can’t design a house “generally” either, since you need the exact data of the soil, slope, floor planning (entrance at the very top or bottom), etc...

So I don’t understand, what do you do first now?

Exactly for the reasons you mentioned, it would be sensible to use equity (if sufficiently available) for the purchase of the land. The land purchase will later be counted again as your own funds by the bank when buying the house. So you don't lose anything. But a hillside plot? Isn't there anything flat? Building a house on a hillside plot can incur significant additional costs depending on the soil conditions.

Certainly, that much equity is sensible, but we are not millionaires and we don't have 60,000 euros in petty cash. Of course, you can save that amount as well, but after 30 years of saving, do we still want/can we still build or even get a mortgage at all? After all, as a retiree, you can't repay a 30-year loan anymore at some point. Saving every year means 9,000 euros more rent - which could have gone into our own house. What we lack in cash (currently we can just about cover the additional costs), we wanted to contribute through our own work. The house would be a self-build house and since I am free anyway, there would also be enough time. We wanted to contribute 10-15% through our own work. I would feel more comfortable with more cash, but that is wishful thinking for now. My father-in-law bought entirely without equity and there were never any problems. Back then that was apparently possible, today I think it's better to build yourself, then the house is new and you can do some work yourself to save costs.

That sounds very adventurous, what you are writing.

I can only advise you the following:

1. Do not buy land without a soil survey
2. have a construction company roughly quantify your wishes in numbers
3. go to the bank and calculate with these values and your income.

The mentioned 60k does not by far make one a millionaire, but it would be the minimum to even consider building!
And to build a house, you have to be approximately a (DM) millionaire!!!
Forget about spending on rent, better build. That works, but then the corresponding equity must be there!!!

So if you really needed 60k equity to build a house, hardly anyone could afford that. At least not the average German family. I doubt they are even capable of putting aside anywhere near that much cash in a reasonable amount of time. Still, average families also build houses. How do they do that?

Equity as "security" is also purely nonsense mathematically. Let’s say I want to build for a total of 250k euros. For example, 50k euros of equity is required as "security". Then I could just as well say: okay, then 200k euros and zero equity. The installments would come out the same (ignoring interest rate) as 250k WITH equity. But that’s still not accepted, because then all of a sudden they say: with 200k you need 40k equity. I don’t understand that. It should depend on the installment amount whether you can afford it, not on how many thousand euros you have lying around in the bank.

I had it calculated that for a loan of 200k the installments would be about 800 euros per month (and we still plan to suspend repayment, which is possible with the KfW portion, and that would mean the installments would be even lower). We already pay 800 euros in rent now. So purely in terms of installments that shouldn’t be a problem.

However, the 200k is the total construction volume. From that, 10-15% would still be deducted because we provide in-kind work. We know quite well that we are not the richest and accordingly want to compensate by doing in-kind work (or rather I will, my husband has to work) and by cutting out frills and luxury from the house. We are planning only one floor (bungalow) and no basement. So we are already adapting our wishes to our possibilities. The 200k is only a rough preliminary estimate anyway, it will probably be significantly less. But it doesn’t hurt to plan some leeway.

Equity as "security" is purely nonsense from a mathematical point of view.

Ah yes, as an example: the construction costs amount to €250,000, the market value would be €200,000, and at the first foreclosure auction the bank bids 75% of that, so €150,000. So the bank gives the missing €100,000 without any collateral, purely on a leap of faith?

If the self-builder runs out of financing halfway through, the house is of course even less valuable when only half finished.

... and how others do it is none of your business, or will they pay your installments if you can no longer do so?