Sure, the condominium is then of course to be sold. But with some delay, since we still need to live somewhere during the construction phase. We either have to redeem the old loan or transfer it to the new building.
I somehow lack the imagination of how that should work. But there are surely specialists on the topic here. If you don't sell the place beforehand, with a loan of €380k (upper calculation) after deducting the land + shell construction + roof + windows + a few small things, you should run out of money to continue building.
The condominium is just a chunk of equity that you just don’t have "liquid."
Of course, that is a good question. But I think I am not alone with the problem of an already existing property that represents a large part of the equity. There must be experiences with that. But of course – at least during the construction period I would have both projects on my hands.
The easiest is the bank that financed the condominium. If the new house is financed there. Then a loan with a variable interest rate is made. The bank is already in the land register, has already valued the apartment, etc. The security purpose declaration (the paper stating for which purpose the land charge is registered) is redone. This is not rocket science. Another bank can also manage this but with a bit more effort.