Construction financing - duration of land purchase / house construction

Hello everyone,

as it currently looks, we have the opportunity to buy a plot of land in January 2018. However, it can only be built on starting in January 2019. (Wird vorher noch vom Eigentümer erschlossen, da dort mehrerer Grundstücke entstehen) We have already decided on a developer.

Since we are still quite new to the whole topic, a few questions have come up for us.

How does it work with the interest (Bereitstellungszinsen?) during that time? We would like to finance the land and house together. Is that still possible if there is a longer time span in between?

We have appointments with the bank and the developer again next week, but maybe there are some helpful tips here?

Thank you very much and have a nice evening.

A property developer sells a house with land, A general contractor/prime contractor builds you a house. I would leave your GC behind at first, so that the tax office does not get the idea to also charge you land transfer tax on the house. Besides, a lot can still happen (gather information about individual construction phases). Commitment interest must be paid with too early financing. I would want to avoid that. Either by purchasing the land without a loan, i.e. with equity, or with interim financing.

I solved the almost identical situation with a variable interim financing. Mainly because the exact construction costs are not yet precisely determined and, of course, because of the commitment interest. Some banks do this with a mortgage that is then redeemed later. Of course, that incurs the fees. A few, especially regional branch banks, also offer this with very little interest surcharge and without a mortgage. That makes it flexible. I recently signed the latter and can switch at any time and also have no coordination problems because of the mortgage entries.

We have negotiated a loan with the bank.
In addition, a provision period of 12 months was noted, with the verbal indication that this period could also be postponed by a few months if the start of construction was delayed. This was indeed the case and was postponed by 2 months.
Only after this period do commitment fees apply for unused capital.
Before this period, we can also return unused capital directly, meaning immediately "repay"/amortize it without ever having used it.

Example of how it was for us (numbers made up):
11/2016 Loan agreement with the bank for €200,000 concluded (signed).
Provision agreed until 02/2019.
11/2016 Purchased land, €100,000 drawn from the loan and used to pay for the land.
12/2016 Construction contract concluded.
Construction start only 04/01/2017 instead of 02/01/2017.
Provision with the bank changed until 04/2019.
06/01/2017 First partial invoice from the builder received for €10,000.
06/02/2017 Drawdown of €10,000 from the loan (from here we pay interest for €110,000 according to the loan agreement).
07/01/2017 Second partial invoice from the builder received for €15,000.
07/02/2017 Drawdown of €15,000 from the loan (from here we pay interest for €125,000 according to the loan agreement).
...
...

If 04/2019 is reached and we...
a) have drawn €100,000 of the loan, we must also pay interest for €100,000.
b) have drawn €90,000 of the loan and do not need any more money from the loan, we return the last €10,000 and pay interest only for €90,000.
c) have drawn €90,000 of the loan and still plan to use the last €10,000 later (e.g., to pay for the road finishing), we pay regular interest on €90,000 and commitment fees on €10,000.

So for us, there was half a year between the purchase of the land and the first invoice for the construction. Due to the provision period, we only had to pay interest on drawn capital. Only after the provision period do commitment fees apply for unused capital. Unused capital can either be returned at the end of the provision period (and thus no longer drawn in the future) or held (for which commitment fees are then charged).

My tip: Banks and construction providers are like applications: do not just send one, but get many offers. With every conversation, you become smarter or sometimes find the occasional black sheep and can better assess the other white sheep.

Thank you for your quick responses.
So we are buying the house and the land separately. We have a company build the house and buy the land from a different owner. So there are no problems with the real estate transfer tax, right?

Variable bridge financing means that I finance the land first and as soon as I want to finance the house, I switch to a different/new loan that covers both house and land together?
But then I can’t secure the low interest rates we currently have, because in a year it might look different again, right?

Thanks for your detailed breakdown.
That means I complete the financing for both, take out my €100,000 (your example) from my €200,000 for the land purchase on 01.01.2018.
Then I pay interest on the €100,000.
For the remaining €100,000 that is still in the bank, I only pay availability interest after (if agreed) 12 months?
Unless it goes faster and I can draw the money earlier because the construction starts earlier and then I only pay availability interest on what I haven’t drawn yet?

Sorry for my many questions. Have a nice evening.

So we buy the house and the plot of land separately. We have the house built by a company and buy the land from another owner. Therefore, there are no problems with the real estate transfer tax, right?

no problem, you said "Bauträger," which implies that the seller and the construction company are the same. So "Bauträger" is just the wrong word. Still, no problem for you.

So I conclude the financing for both, take out my €100,000 (your example) from my €200,000 for the land purchase on 01/01/2018. Then I pay interest on the €100,000. For the remaining €100,000 still in the bank, I only pay commitment interest after (if agreed) 12 months? Unless it goes faster and I can withdraw the money earlier because the construction starts sooner, and then I only pay additional commitment interest on what I haven’t withdrawn yet?

exactly