Financing questions / Land / Equity

Hello everyone,

I would like to briefly introduce myself again. My name is Dennis, I am 34 years old and come from Schleswig Holstein. My fiancée and I want to start building this or next year. Now we are slowly starting to plan the financing.

We will probably buy a plot of land soon (through financing) and start building next year. We have already searched online to see if the installments paid by next year (repayment) will be counted as equity next year. Sounds complicated when you have to write it down.

In plain terms, the plot of land should cost 60,000 EUR and we currently have 13,000 EUR as equity. Financing would start this year and the financing for the house next year. Will the part we have already paid for the plot be counted as equity for the house?

Thanks for helpful tips!

Best regards
Dennis

Almost yes, if you take the value of the property for the total costs.

But how much do you want to repay in that one year? That will hardly be the deciding factor.

Do you already know the total costs for the house? You should already be at the point where you can discuss this with the financing bank. Because if you are not financing variably, you are tied to the same bank with the house under the conditions the bank offers later.

If you want to stay flexible, you should only finance with a short term or even variable until the house planning/costs/financing is finished.

Basically yes, if you use the value of the property for the total costs.

But how much do you want to pay off in that one year? That will hardly be the decisive factor.

Do you already know the total costs for the house? You should be far enough along there to be able to discuss this with the financing bank. Because if you are not financing variably, you are tied to the same bank for the house under the conditions that the bank then offers later.

If you want to stay flexible, you should only finance with a short term or even variable until the house planning/costs/financing are finished.

:) Thanks for the quick answer!

You are of course right! Primarily it is about the 13 euros that we want to pay as a deposit for the property. Will the 13 then be taken into account, plus the payments that come monthly?

:) Thanks for the quick response!

You are of course right! Primarily it’s about the 13 euros we want to put down for the plot of land. Will the 13 then be counted in, plus the payments that come monthly?

Hello!

Your ancillary costs partly go towards land transfer tax & notary fees. So the equity will not flow into the loan-to-value ratio and interest rate determination (logical since there is no value retention).

Purchase price: 60, ancillary costs approx. 6 % = 56,000 minus remaining equity = financing 45,000

So do you want to include the 13,000 completely or later as a special repayment?

I’ll put it this way. The new build will certainly be an amount around 150-200. The 10-13k as equity doesn’t make much of a difference there.

Why don’t you request the full financing? You do know that when the main financing comes, you are bound to the institution for the land? Whether you find a second with lower priority, I doubt.

Equity minus incidental costs plus repayment reduces the financing requirement and is therefore definitely relevant for determining the loan-to-value ratio. But with the small amounts, it is at most a matter of a single-digit percentage.

It's a pity that the rest of my post was not addressed by the OP.

Therefore again: What does the WHOLE plan look like including the house and how much should already be repaid on the property before construction begins?

... I’m reluctant to be a spoilsport, but building actually costs money. €13,000 equity is little money.

How is that supposed to work at all? Inheritance? Exorbitant money (although then the equity doesn’t fit)?

Not comprehensible.