Financing Check: Building a House in 2.5 Years

To secure a first priority, that was the idea.

This is stipulated in the contract. It is called priority reservation. Do not order a land charge. There is no reason for that.

There simply isn't enough time now.

Haste makes waste... Why the rush?

What role does a possible repurchase play?

Depends on the property. Please have it registered subordinately.

If the bank doesn't accept that, then you can still change it and assign the priority.

Do it right from the start. Sounds totally rushed.

This is determined in the contract. It’s called subordination. Don’t order a land charge. There’s no reason for that.

Haste makes waste... Why the rush?
Depends on the property. Please have it registered subordinately.
Just do it right from the start. Sounds totally rushed and sloppy.

Thanks for your feedback! In the end, everything was no big deal, nothing will be registered. However, the next hurdle is that a physical land charge certificate is still missing... It needs to be found now so that everything can continue.

We now have to settle into our new role as landlords. And meanwhile, still continue to look for a plot of land. In Buchholz, it continues with more information about the allocation procedures starting from January 11th. It’s going to be an exciting year!

So, here, blow away the dust.
The multi-family house has now been in our possession for 4 months, all land register entries done. The plot has been found, see other thread, including incidental purchase costs around €300,000 for 673 m² of land and 91 m² private road.

Financing will look like this: we will finance the entire project 110% through loans. The multi-family house will be mortgaged for €420,000, loan-to-value ratio 60% - we aim for the same with the new building.

The loans will all run through 2 credits, one is currently waiting for the bank’s confirmation, the other has already been preliminarily checked.

Loan 1 on the mortgage of the multi-family house: 2% repayment, 15 years fixed interest, 0.91% interest rate. Installment €1050. Repayment change free of charge, special repayment 5%. We plan to deduct this on taxes, we’ll see if that works out.

Loan 2 on the mortgage of the plot: it has already been calculated but will be recalculated with the current KFW conditions and the planned construction sum.

Additionally, we invest the difference at 3% repayment rate in a broad ETF.

Loan amount should then be about €840,000, of which €40,000 goes into the multi-family house for gift tax and a small reserve. The KFW 40EE subsidy is targeted, but not yet included in the calculation.

Construction costs would then be:
€300,000 land including incidental costs,
€425,000 house building
€75,000 incidental construction costs

So about €800,000 total.

House key data:
160 m², fully brick-clad, 1.5 floors, gable roof with captain’s gable, kfw40ee, active ventilation, normal standard.

Our household calculation looks like this:

Income as of today:

4700+438+2360=7500€

Expenses
Loan 1+2 = €2200
Investing to repay at the end of fixed interest period: €800
Total = €3000
Corresponds to about 3% repayment.

Additionally going out:
€1000 annuity to the donor (85 years old..)
€600 reserve (if less than €10,000 in the account)

Fixed expenses are then: €1600 + €3000 = €4600

That leaves us €3100 for ancillary housing costs, insurances and cars (€800), household and consumption expenses (€1600) and daycare (€200) and daily money leftover (€500)

When both work again, which will be only after moving, and the annuity ends, this increases to €4600

Rent increase and salary development excluded

Our equity of €35,000 stays with us for now.

Opinion?

We are planning to deduct it from taxes, let's see if that works.

So loan 1 is also used for the new building / land purchase, but the multi-family house serves as the collateral object?

If that is the case, the whole thing cannot of course be deducted from taxes, since the causal / financing connection only exists with the privately used house and thus represents costs of private living (§ 12 No. 1 Income Tax Act).

We already had this topic here in another thread. Of course, it could go through in the tax return, but that would at least already be negligent tax evasion. Since you yourself write about the attempt to deduct it, you are probably aware of this, and then intent could be assumed, but that is another matter.

Personally, I would not try it.

Hmm, was suggested by the financing broker. Everything is with the tax advisor, he will know what he is doing.

Financing agent

He can easily suggest that too, since it sounds good, he wants to generate a deal, and in the end he is not liable for it either.

The tax advisor is the right contact person. Although every reputable professional cannot give you any other answer, since this connection is absolutely clearly regulated for tax purposes.
You just have to logically think about what you are taking out the loan for. Do I want to generate income with it, or do I need it for myself?
If the answer is always the latter, it cannot have a positive tax effect for you either (complex tax-saving models excluded).