Land financing for construction only in 3 - 5 years

Hello everyone,

so far I have only been a passive reader, but now I want to benefit from your extensive knowledge and hope you can give me some good advice.

My girlfriend (26, student teacher and will be a civil servant in about 2 years) and I (27, civil servant) want to build within the next 5 years, realistically no earlier than in 3 years. In her hometown, a new development area is being developed, where we have a chance to get a 600 sqm plot for 170 € per sqm. The demand for the plots is very high.

Plot including incidental costs: approx. 110,000 €
Equity: 20,000 €

Apart from the fact that we do not yet have concrete building plans, we want to secure this exact plot now.
Therefore, the question arises of the type of plot financing.

- flexible with Euribor
- 5 years fixed interest with the risk of a prepayment penalty (is this really relevant and high?)
- forward loan already now for a house, the cost of which we do not know
- any other ideas from your side?

Since my girlfriend currently has no income, I will have to service the loan alone at first. My income is 2,100 €.

Besides the question of which loan is the best, we are also interested in repayment and equity.
- already include the available equity in the plot financing or rather finance fully.
- repay as much as possible or repay little and save equity for a later loan when building the house

Thank you very much for your help :)

Read the conditions for land allocation carefully? Often, you have to meet certain deadlines regarding the start and completion of construction. For example, with us, the building application must be submitted within 2 years.

The problem will be that the bank wants to be registered in the land register. In other words, when it comes to the house financing itself, you cannot choose a different bank later.

Equity capital that now goes into the land basically acts as equity capital in the later financing. In addition, the bank wants to see the incidental costs paid; otherwise, the loan-to-value ratio and thus the interest rate will be significantly higher.

How much do you think you can save per month in the next few years?

Hello, thank you very much first of all.
Buying from a private seller, therefore no deadline.
The second point I am aware of. That’s why the term is set to a maximum of 5 years or flexible with Euribor. Or did I misunderstand something? At the end of the term, a follow-up financing with assignment of the land charge begins.

I have been keeping a financial overview for almost exactly one year. I manage to save about €5000 per year and have traveled a lot so far. I am aware that I will have to take it easier. My girlfriend will only join in about 2 years. From then on, her savings will be similar.

Of course, I will not pay additional costs with the financing.

Therefore, a term of max. 5 years or flexible with Euribor. Or did I misunderstand something? At the end of the term, a follow-up financing with transfer of land charge begins.

A land charge will be necessary immediately. Also for a dynamic / 5-year financing.

Of course, it can be redeemed during the follow-up financing. It’s just higher
higher costs.

But not all banks allow borrowing only against the land.

Assuming you do that and finance 90,000. Then after 3 years you have paid 4,000€ in interest. If you manage to continue saving 5,000 annually, that means effectively only 11,000 more on the equity side.

So, calculatively 30,000; which even today is not considered really much equity.

Building a house is not cheaper.

And interest rate risk for already existing and future obligations (the house) on your back. So together easily 420-450,000 :eek:

Was your income of 2,100 net?

Have you calculated that through until the end?

Hmm difficult. On the one hand it is worth it now, on the other hand there are a few catches. Even if you buy from a private seller, there is a development plan for the property. This plan often loses its validity. In other words, you have no guarantee that the property will still be a building area in 3 years. We also bought "privately" (it was a company), but we also had to complete our construction within 2 years. After that, the development plan would have expired and we would have had to apply for a new one ourselves.

Does your girlfriend already have a prospect for an apprenticeship? Because it could very well be that she doesn't get anything with you and then has to move away.

Also don't forget that property tax is due annually. It should be manageable, but it will come out of your savings rate.

Then I don't know how it will be in winter. Do you also have to clear and salt the sidewalk at the undeveloped property?

Liability insurance as a property owner is also added.