Finance buying land or rather leave it?

You just have to calculate what the maximum rate would be for you and convert that into an interest rate. And then simply play through the probability of whether the interest rates could rise until then

I think I'm a bit confused right now. Do you mean that the interest rates would rise so high that we could basically only pay the monthly interest? For example, with a loan of €60,000 and a rate of €600 (annual €7,200), the interest would rise to 12%? I think our problem is more the decision between interest rate security and the feeling of gambling. I don’t see that we wouldn’t be able to afford the rates even with very strong interest rate increases. We just want to try to pay as little interest as possible so that we then have more equity for the house construction.

Is the difference over 5 years really that high? Calculate with the variable and the fixed interest rate and what that means in terms of interest difference.

With the two interest rates mentioned above (4.5% and 3.75%), the difference at the end of the first year would be about €550 in interest with a €600 payment. But since we would make special repayments in both variants in addition to our normal rate, the difference will get smaller the more we repay. The same applies if the rate increases. Therefore, I cannot calculate an exact interest difference over 5 years. Especially since I do not expect the interest rate for the variable loan to remain the same for 5 years. Have I interpreted that correctly or was it meant differently?

Future predictions about interest rates can't really be pinned down. My personal crystal ball says something like "I suspect that in the long term (5-10 years) they'll go down again, but in the short term I think it will remain volatile and could very well continue to rise." But a) what do I really know and b) that probably won't help you much with your decision... Variable rates have the advantage that you can usually make special repayments spontaneously and without much hassle (get this explained to you if necessary), whereas with fixed rates you often only have the opportunity once a year. Otherwise, for me the situation here is also different than if it were about the entire house sum or something similar.

Would you be more upset if interest rates now rise to 5-6% and you have variable financing, or if they fall to 2% and you have fixed financing? Does that make such a massive difference for the 5 years and the fixed interest period? Which option lets you sleep better? How likely is it that you might actually start planning a house sooner?

I believe it is because you only want to finance one [Grundstück]. The risk for the bank is significantly higher there, because the period of rising [Grundstückspreise] is likely over, except for very good locations. New buildings, on the other hand, cannot become any cheaper. So if the market corrects downwards, it will mainly be through the [Grundstückspreise]. Because they were primarily responsible for the price explosions. The house in Munich might cost about 20% more than in Brandenburg, but the [Grundstück] costs ten times as much.

Certainly, the relatively small loan amount also plays a role, because the effort for the bank is the same whether it lends EUR 10,000 or EUR 1,000,000.

Counting on special repayments is risky. You want children and certainly want to build a house on the [Grundstück] soon. There are still so many costs coming your way...

I find the idea of financing the land separately generally quite unfortunate. I am more familiar with situations where people can pay for the land in cash. Then it counts as equity for you and you are in a good position. But if you now finance only the land, there are only these outcomes: a) you build on it when you have fully paid it off, which takes quite a long time – who knows if that will still be your wish then, and/or not already 3 years earlier b) you build on it before you have fully paid it off, then you are either dependent on your land-financing bank, which will impose an interest surcharge on you, or reliant on banks willing to take a second charge, which usually also costs an interest surcharge. That does not help you if, as of today, you are already wondering whether you can afford the construction at all. c) you do not build on it and sell the secured land again – then, as of today, it is quite uncertain whether you will get rid of it again without major losses – also not forgetting the interest you would have to pay for the financing. My gut feeling says: Either go all in now – that is, finance the land and construction project together and start, or alternatively leave it alone.

Could be, but doesn't have to be. Interest rates could be significantly lower again in a few years. Or higher. Or the same. No reliable forecast can currently be made, as one would have to be able to predict how the Ukraine war will develop in spring/summer or how and when the long-standing conflict between the USA and China over Taiwan will escalate.

I know that more from situations where people can pay for the property in cash.

I don't think it's that unusual. Often it's closer in time, but you do read here and there about people who finance the property flexibly and only later finalize the planning enough to know the total sum they need. However, the "how long do I stay variable" period is probably more like half a year to a year, and not so much five... But we've also just come from decades where being six months earlier or later generally didn't make a huge difference in interest rates, but if you look at the past year, phew.