First land, then house: separate financing strategy

Hello everyone,

we are still at the very beginning of the house construction project and are considering how best to plan and finance the whole thing. In this regard, I just wanted to ask here how realistic you consider my idea:

We come from the Rhein-Main region and do not have a plot of land. Since we do not want to become dependent on a house construction company, we want to buy a plot of land first and then start the house construction planning. Unfortunately, our own capital is only enough to finance about 50% of the plot price.
Our idea now is to buy the plot and finance it with a variable loan. When we have the plot, we would start the house construction planning. When it comes to the construction financing, we would dissolve the variable loan, use the plot as equity, and include it in the construction financing.

Unfortunately, we don't have anyone in our environment who has approached the topic of house construction this way. Either one has inherited or bought an existing property. Therefore, we are unsure whether we are overlooking something or if there are pitfalls we should be aware of.

Thanks in advance to everyone who answers! :)

Best regards, Denis

There is currently a similar thread here
https://www.hausbau-forum.de/threads/grundstueck-und-hausfinanzierung-zusammen-oder-getrennt.46045/
I would simply discuss something like this with the bank or a financial advisor. They also provide advice.
Clarify the budget there, search and gather information about the plot and house company separately, and then go back to the bank when finding the plot.

The basic idea is correct. The only thing you need to keep in mind is that the remaining debt on the property & all construction costs must be affordable for you. Otherwise, there are several threads about this here. I am a fan of this structure because you can make unlimited extra repayments even if it is currently not in fashion to do so.

Unfortunately, we don't have anyone in our circle who has approached the topic of house construction in this way. Either one has inherited or bought an existing property. Therefore, we are unsure if we might be overlooking something or if there are pitfalls we should be aware of.

The biggest pitfall in this context would be to take out a loan with a fixed interest rate for the plot of land. Then the bank is registered in the land register for 10 years, and other banks usually do not finance the house because they are only served subordinately. Therefore, a variable financing approach is the right way. The next biggest stumbling block is the calculation. Here, before buying the plot of land, you should get a realistic idea of the construction costs including incidental construction costs and supposedly minor details like landscaping, kitchen, etc. Catalog prices are not a good guide. The total costs must be reasonably affordable for you.

Unfortunately, we don't have anyone in our circle who has approached the topic of building a house that way.

We did it like that, or something similar. We had bought the plot of land and originally didn't want to build on it, so we had secured a 10-year fixed interest rate. After about 2 years, we changed our minds, but despite the low remaining debt on the plot, we couldn't find any other bank willing to finance the house construction in second position. Since we had the financing of the plot through ING, we then also did the house construction through ING, and to our delight, they didn't charge a "nasty" interest rate, even though we were virtually dependent on them. So your idea is exactly right: buy the plot and finance it with a variable rate, then later there won't be any problems finding the main financer :)

Thank you all, that confirms all my assumptions for now and I can continue with the calculation :D