Construction financing with an existing security mortgage

Hello everyone,

we are in the process of buying a property from the city. In the purchase agreement, the city has stipulated a security mortgage. This is intended to secure the penalty clause, as we have a construction obligation and an owner-occupancy obligation.
Now that we are financing the property entirely with our own funds, the security mortgage will be registered in the land register.
Will we be able to obtain a construction loan, even though this mortgage is registered in the land register?

As an alternative, the property can be financed by the bank. This would place the bank first in the land register. However, this would only be a last resort.

Best regards.

Are you sure that it is a security mortgage and not a limited personal easement? Have you already spoken with the municipality about how subordination is handled?

Are you sure it is a security mortgage and not a limited personal easement? Have you talked to the municipality about subordination?

Yes, absolutely sure, it is explicitly stated as a security mortgage in the contract. The city is willing to go one rank lower if financing of the property is carried out. But since we are paying for the property ourselves, we don't have a bank that would come in at the first rank.
The construction financing will only be arranged directly with the contract for work of a general contractor, i.e. after the notarization of the property in terms of timing.

So in our development area, the [Sicherungshypothek] is also common. The bank also comes in at first rank for later financing of the house and the city in second rank. It doesn't matter at all whether you pay for the land in cash.

So in our construction area, the security mortgage is also common.
However, the bank also takes first priority with a later financing of the house, and the city takes second priority.
It doesn’t matter at all whether you pay for the land in cash.

Thank you very much for the information.
It will probably be the same for us. I found the clause in the notary contract where it is explicitly mentioned.