First the land, then the house years later?

Hello,

Plots of land are becoming more and more expensive... unfortunately, we currently lack the necessary equity to reach what we consider a reasonable loan installment. Nevertheless, we can set aside a few hundred euros every month.

Question: What do you think about starting to search for land now and using the monthly savings amount, instead of putting it into a savings account and ETFs, to pay off a loan for a plot of land?

Looking forward to your opinions!

Hello,

it depends on the property... nowadays there is very often a building obligation within a certain period (often about 3 years) to prevent speculation.

In principle, I personally don't think the idea is bad. Whether it actually makes sense is another question altogether.

We did it that way.

Quite sensible if you are sure to build there in the future as well.
Plots with building obligations (or pressure from neighbors) should be avoided.

Just keep in mind that a few additional costs will also arise (property tax etc.).

Do you have enough equity for the plot, keyword property transfer tax, notary, or possibly broker?

Sure, there should be no construction obligation. A construction obligation would mean losing the flexibility that one actually wanted to gain through such a plan.

We are aware that additional costs will be incurred. For Brandenburg, one should probably reckon with 18% (including broker, excluding development costs). And no, currently we could not finance that from equity. That would probably be the ideal solution.

Were you able to finance that from equity and if so, what kind of financing did you decide on?

We were able to pay the ancillary costs of the property with equity (fortunately, we didn't need a broker).
We then concluded a 15-year fixed interest rate for the property, 100% financing.

2 years later, equity was available again, or rather old building savings contracts were dissolved, for ancillary costs/development.
Construction financing (including kitchen) at just under 100%. The amounts already paid off for the property were credited in our favor.

2 important things still:
1.
The bank of the property has first priority. You are then dependent on them for the house loan; any other bank will demand security surcharges.
2.
(our mistake)
Don’t make the rate for the property too high even if you have more money available. Better to make special repayments.
When it comes to the house loan, the bank will set the repayment rate fixed. So, it can mathematically happen that too little repayment rate remains for the house. That cost us a lot of nerves... (and maybe also a few decimal places on the interest due to a fictitious term of 35 years. That the repayment rate for the property is free after 12 years no longer matters to anyone)

You can do it that way if you are sure you want and can stay in the area.