Finance property - construction in 3 years

Hello everyone,

after a long decision-making process, we have finally found a plot of land. 853 sqm for 200 thousand euros + property transfer tax (3.5% Bavaria) + notary (1.5%).

As equity, we would contribute our cash assets of 55 thousand euros.
Together, we have a net average salary of just over 7000 euros (both 3500).
According to a household budget, we would now like to pay off about 1500 euros per month for the land and also make special repayments, in order to build in about 3 years (meanwhile planning calmly, etc.).

In an initial inquiry, the cheapest variable loan with the option of 1000 euros up to 100% special repayments was at 1.95% effective interest rate. Are variable interest rates generally this high?
I have been observing the interest rates for almost 2 years and despite the uncertainty (the borrower might repay the entire loan soon), I would have expected a lower interest rate from the bank...

Could someone explain why the interest rate is so high? Do you have any tips for better offers? Are there other options?

Interest is OK for you, but actually much too low for the bank. Why? The same work as with "normal" long-term financing (even there the margins are extremely tight), but the risk of the short to very short term. The bank hardly earns anything from it (high unit costs).

Nordanney has already provided the correct answer.

A financing like the one you describe should cost about 1,000 - 1,500 euros. If you repay the loan in three months, the bank will not have earned a single euro from it.

As the two have said, thanks to the special repayments that you can and certainly will make, it is an uncertain cash flow for the bank that needs to be secured. Interest OKAY

Hello everyone,

after a long decision-making process, we have finally found a plot of land. 853 sqm for 200 thousand euros + land transfer tax (3.5% Bavaria) + notary (1.5%).

As equity, we would contribute our cash funds amounting to 55 thousand euros. Together, we have an average net income of just over 7,000 euros (both 3,500). According to a household budget, we now want to pay about 1,500 euros monthly for the land and also make special repayments in order to build in about 3 years (planning calmly in the meantime, etc.).

In an initial inquiry, the cheapest variable loan with the option of 1,000 euros up to 100% special repayment had an effective interest rate of 1.95%. Are variable interest rates generally this high? I have been watching interest rates for almost 2 years and despite the uncertainty (the borrower might possibly pay off the entire loan soon) I would have expected a lower rate from the bank...

Could someone explain why the interest rate is so high? Do you have a tip for better offers? Are there other options?

The case is quite similar to ours and we did it as follows:

Plot of land ~ 330k EURO. For this, 200k loan fixed for only 5 years with only 1% repayment due to super cheap interest rates (0.9%). Beforehand we spoke with the bank (Ing-Diba) to check if a second loan for house construction is possible without problems. We have now also taken out this second loan (300k) and fixed it for 15 years. We have thus divided our equity over both. We do not make special repayments in between, but save in order to repay as much as possible from the first loan in one go in 5 years. The rest (if any) we simply continue to finance.

Regards, Steffen

2. Loan but then at the same bank as the 1st loan, right? Otherwise it gets complicated...