Land as equity capital - Worth the wait?

Hello,

two short but concrete questions.

1. We are expecting to be transferred a plot of land on which we would like to build.

Since we would like to plan somewhat more concretely, we are also thinking about financing. The question is to what extent it makes sense to wait with the bank meeting until the land is finally transferred in order to have it counted as equity by the bank. (Googled standard land value for the area * m² of the plot = approx. 120k). Can one estimate to what extent this would improve the conditions?

Is it realistic to get about 320k loan for building the house with approx. 80k equity + described land registered in our name, so that one can plan with 400k (including EVERYTHING, incl. kitchen etc.)?
I have already looked at all the loan calculators but could never find one where you can also value the land.

2. KFW financing.
We would like to build KFW40. What is the sequence here? Do you first plan the house (without knowing if you will get the loan for the planned house), apply for the KFW loan and then mention this at the financing meeting (since this relieves the bank)?

You do not apply for the KfW loan separately. This is handled through the bank you are financing with. As far as I know, you inform your bank that you want to build with KFW, and they accordingly plan the KfW loan. I don’t know to what extent plans are necessary for this. Afterwards, you have to prove to the KfW bank that you have reached the standard. You can already talk to the banks now and simply explain the situation that you will soon own the property. Then they should (I think) plan accordingly. How long does it take until the transfer of ownership?

OK, thanks in advance for the quick reply.

It might still take a while until the transfer. My feeling is that it would be better to have something concrete, registered in the land register. Is a property considered equivalent to equity? So, for example, is 100k equity worth the same to the bank as a property valued at 100k?

1. We are prospectively going to be granted a plot of land on which we would like to build.

Since we would like to plan a bit more concretely, we are also thinking about financing. The question is to what extent it makes sense to wait with the bank meeting until the land is finally transferred in order to have it counted as equity by the bank. (Googled standard land value for the area * m² of the plot = approx. 120k). Can one estimate to what extent that would improve the conditions?

Not at all. The land is equity for you, regardless of whether you are already the owner or will become one.

So, for the bank, is 100k equity just as valuable as a plot of land estimated at 100k?

Where is the difference? Either you have €100k and buy the land, or you had €100k and already bought the land. €100k is and remains €100k.

Since we would like to plan a bit more concretely, we are also thinking about the financing. The question is to what extent it makes sense to wait with the bank meeting until the plot of land is finally transferred in order to have it counted as equity by the bank. (Googled standard land value for the area * m² of the plot = approx. 120k). Can one estimate to what extent this would improve the terms?

Counts as equity. You can also enter it like that in the common calculators. We are doing exactly the same right now and our bank advisor will submit the application in the next few days; he currently just needs the draft of the notary contract for the land transfer – the rest can then be submitted later. When we sign the contract at the notary finally, we will have the land charge registered directly for the bank, which also saves another appointment.

Is it realistic to get about 320k loan for the house construction with approx. 80k equity + the described plot registered in our name, so that one can plan with 400k (with EVERYTHING included, incl. kitchen etc.)? I have already looked at all the loan calculators but could never find one where you can also value the plot.

Absolutely. Our plot is worth 60,000 and we are getting 400,000 at 1.33 fixed interest for 30 years. Nothing to complain about there.

2. KFW financing. We would like to build KFW40. What is the sequence here? Do you first plan the house (without knowing if you will get the loan for the planned house), apply for the KFW loan and then mention it in the financing meeting (since it relieves the bank)?

No, you plan the house and then go to the bank. The bank will then check which KFW subsidies are possible and, if applicable, include that in your loan offer. But all of this runs through the bank; you yourself do not apply for a loan at KFW.

The loan amount must be assessed in relation to the income, so nothing can be said about it. Equity is good and ensures better conditions, but otherwise the household budget must be balanced.