Financing - Proposals for complicated situation

Has cold calling been done in the neighborhood of the property to find out who the owner might be in order to possibly negotiate with them without pressure?

Yep, we were at the neighbor’s, but he had little good to say about the seller, that does not seem like a way out to me.

1. How realistic is our plan to take out a loan for the land purchase? Does the fact that I already have an employment contract for March (of course, probation period...) play any role at all? Is there a bank that you would especially recommend?

Currently, you have no income, and normally that is not taken into account. There is no guarantee that you will start the job or not be terminated after 3 weeks.

2. What should we consider with a two-part execution (Loan 1 for €340,000, Loan 2 then for approx. €280,000 by using the equity from the apartment sale)?

Very important: do not take out loans with fixed interest rates but finance the land only with a variable rate. Otherwise, one bank will hold the first priority lien in the land register, and no other bank will want to grant a second loan subordinated. The conditions will then reflect the lack of competition.
With variable financing, you can terminate the first loan and combine both into one large loan.

I have also considered whether only KFW would be an option for the second loan (2x €120,000 from the Efficiency House 40 program – we are still planning a rental apartment – and the remaining €40,000 might also come together somehow, or for that we might still have to take out another loan). Is it conceivable that a private bank as well as the KFW would go along with such a model?

There are banks that also mediate promotional loans without their own tranche. My financing through a savings bank consists of 1 KFW and two L-Bank loans. However, the point remains that the mediating bank wants to be entered in the land register, and this is only possible if no other bank is listed there. But it’s an interesting approach to refinance at one bank. What I see as critical is that after the first longer term, you are at the mercy of the bank.

3. My brother-in-law said you can also take a loan without special repayment options and thus with a slightly lower interest rate, because thanks to the special termination right you can just put the money aside and then "pour it in" after 10 years as much as possible and also continue to make special repayments without the interest agreement made for e.g. 20 years being canceled.

Your brother-in-law is wrong there. You have the right to terminate the entire loan contract after 10 years and settle it with money you get from somewhere. Changing conditions unilaterally is not allowed.

I am with the others on this. First clarify what is going on with the land. Something does not seem quite right there.
And then get the land with bridge financing and properly finance according to the construction contract.

With variable financing, you can cancel the first loan and combine both into one large loan.

That seems like a sensible approach to me. The only question is: Is something like that just as realistic for us in the current situation regarding a bank’s approval as an annuity loan? The interest rate is higher, right?

There are banks that also mediate promotional loans without their own tranche. My financing through a savings bank consists of 1 KfW and two L-Bank loans. But the point is still that the mediating bank wants to be in the land register for that, and that’s only possible if no one else is listed there. But it’s an interesting approach to refinance with one bank. What I see as critical is that after the first longer closing, you are at the mercy of the bank.

Ok, I had thought that the KfW was always just some kind of "co-financier" that is involved, which would have happened here retrospectively in a way. But so the same problem with the existing land charge arises, right? Or is your objection based on the fact that there would be a different mediating bank here? To clarify again: I thought to take out a very small loan (so maybe €40,000) after the first loan for the land from the same bank and to include the 2x€120,000 from the KfW as well as the equity from the apartment.

I’m on the same page as the others. First clarify what’s going on with the land. Something doesn’t seem quite right there.

We had a long conversation with the neighbor, who might have bought the land himself at a lower price. His information aligns well with that of the realtor: the son of the former owners still lived in the house in the meantime, has now moved out, and according to the realtor, he had unrealistic expectations from the start and according to the neighbor was a rather difficult guy; now the whole thing was listed for almost three quarters of a year, they lowered the price for the first time two months ago, and now again, because the seller apparently wants his money quickly. That it hasn’t sold yet I explain more by the fact that of course, the land with the existing building already costs so much that for most people the house budget would already be used up. The house itself is a settlement wooden house from 1918 with smaller additions from the 60s/70s, with an absolutely disastrous layout and in very poor condition, at least visually. That most people have turned back at the doorstep so far doesn’t surprise me. We wouldn’t have even considered it if there wasn’t quite a bit of architectural expertise in my wife’s family.

Otherwise, I wouldn’t know how to check whether something is wrong. From the neighbor who demolished an identical building 20 years ago, we know that there are no serious issues with pollutants. We have had preliminary talks with the building authority etc. regarding our project. Or do you have something specific in mind?

Good morning,

I see the problem with the overall financing. If you were to get the 140k for the plot now, building the house would be a follow-up financing with correspondingly worse conditions.

So either take out an interim financing here with a mortgage on the selling apartment.

And the borrower can either be the parents (?) or you. Then the interim financing would be repaid with the sale proceeds / gift.

The plot would then be paid in cash without a mortgage (equity & interim financing).

: Thanks also for this assessment. But it’s about 340k that we would need for the financing of the property.

And once again the question: Is the bridge financing with a land charge on the apartment even feasible if there is still a usufruct on it? Would it then also not require a notary appointment, which my wife’s father only got in mid-February in order to initially dissolve this usufruct issue?

But in principle, that sounds doable: We take out a variable loan with the apartment in Munich as collateral (what would the bank need for that?) and repay it as soon as we can manage a larger loan (probably after my probation period in September) for the entire construction.

Edit: Oh, and the value of the apartment (1-room kitchen bathroom with 35 sqm, but downtown) will probably be somewhat below what we are aiming for here as a loan.

And once again the question: Is the bridging finance with a land charge on the apartment even feasible if there is still usufruct on it? Would it then also not require a notary appointment, which my wife's father only got in mid-February to first resolve this usufruct issue?

For part 1 of your question, there is a clear yes. Since the usufructuary should statistically already be dead, the usufruct no longer has much value. For part 2, a clear no. You only get rid of the usufruct through the death of the usufructuary or through a notary appointment.