Is it possible to claim property as equity?

Hello everyone,

we want to build a house and are in the financing planning phase and have a question about equity. We already bought a plot of land a few years ago without a loan. Can I count this as equity and at what value (market value, standard land value)? And is the value of the land included in the calculation of the financing for the construction project?

So (just hypothetical numbers)
Planned construction costs 300,000€ including incidental construction costs (please disregard that this might not be accurate)
Land value 75,000
Cash: 25,000
Total construction sum: 400,000€, of which (land value + cash) = 100,000€ equity = 25% of the construction sum

Would banks also calculate it this way or do they assume that you can only count 25,000 of 300,000€ as equity according to the example above (i.e. about 8%)?

We haven’t been to any bank for information yet, that will of course come. Maybe someone could relieve me of this suspense already

best regards
TD

The plot counts. If it was bought a few years ago, the question is, of course, at what value it is assessed. Presumably, the bank uses the standard land value as a reference.

Of course, the cash portion should not be added to the construction sum; I was no longer able to correct that above. But thanks anyway so far. Once again, for my clarity: You would then add the land to the construction sum to determine the equity ratio, right? (Is that even that important?)
Best regards

The equity ratio itself is not that important. More important is the loan-to-value ratio, i.e., debt in relation to the loan value. There are usually limits of 60%, 80%, and over 100% after which your interest rate moves up by a certain amount.

Again, for clarity: You would then include the plot of land in the total construction sum to determine the equity ratio, right?

Exactly, in the above case therefore 375k total sum and 100k equity.

Thank you very much. Then I will try using the search function for "Beleihungswert"... best regards td