Financing land and house construction

Hello. We can buy a plot of land relatively cheaply (60000€) from the municipality. However, since we have not really found a house yet, we first need to finance the land. Does it make sense to finance the land through a variable loan with a short term and then, when we have found a BU (within the next 2-3 months), completely repay the variable loan with a larger annuity loan? With variable loans, the interest rates are lower (Euribor) and can be fully repaid at the end of the term. This way, we could avoid having two loans running in parallel. Equity is of course also available, but we would use it entirely for the additional costs. Thank you and best regards

If the equity is sufficient for the 60k, then I would buy the property with it. The property will later be credited to you as equity. If it’s not enough, then maybe ask your parents/grandparents. It’s only a limited time that needs to be bridged.

If you take out a variable loan now, you register a mortgage and later the mortgage has to be changed in terms of amount and bank. These costs including the interest could be safely avoided.

However, I would definitely also talk to banks. Maybe they have another solution. You should do that anyway to find out the maximum loan amount. You don’t want to end up with a property and not be able to finance a house.

Ok, thanks for the note about the [Grundschuld]. Is changing the [Grundschuld] really that expensive? Financing the property from equity was of course my first thought, but somehow I would also like to have something on the side throughout the entire construction phase.

What Musketier wrote is definitely correct, and the most elegant solution would actually be to somehow raise the money to pay for the land in equity. If that is not possible, a variable loan is certainly quite an elegant option, as you are flexible and can terminate the loan with a short notice period. This way, in case of doubt, you are not tied to a specific bank. Interest rates are low, and it is certainly not foreseeable that they will rise exorbitantly in the next few months, so the interest rate risk with the variable loan is currently not really a topic of discussion. Of course, it should be clear that there will be additional costs for the reassignment of the land charge. --- : Oh, our answers overlapped there. I do not know how much changing the land charge will cost. Probably a few hundred euros. Only, as long as you do not have a cost breakdown for the house and cannot pay for the land in cash, you will probably have little choice. Regarding equity, it would at least be important to keep a buffer for unforeseen expenses as well as for furnishing (kitchen, furniture, etc....), since these are not financed. Ideally, enough would also be kept to cover the ancillary costs of building the house, although many?/most? banks would also finance these if the land is available as equity (at least that's how I know it from our financing bank).

However, if I stay with the same bank, they could just register a high mortgage from the start that covers the second loan, right?

Variable loan is OK. Keep several tens of thousands aside for the construction phase.