Land financing for construction only in 3 - 5 years

Buying something before it is clear where the girlfriend has her workplace would be stupid. Civil servants have many advantages, but definitely not at the first appointment. There can be a lot of arbitrariness. Having a place of residence gives no advantages here. Such things only matter at the first transfer.

We bought our plot of land and at that time took out the corresponding loan with a 4-year fixed interest period. We are now paying this off with the loan for the house construction. We were lucky that the interest rates are historically low. If you choose a 5-year fixed interest period, you are either bound to the respective bank (which they are also aware of) or you have to wait at least the 5 years (more likely longer, since you probably won't manage to pay off the loan by then). I think the model of first buying the land and building later is great because it gives you a lot of time to think about all sorts of things. However, with your financial leeway, it is not quite that easy.

Thank you to all respondents,
great to receive so much feedback!

I have a few questions and answers regarding your feedback:

Of course, this can be redeemed during the follow-up financing. It's just higher
Higher costs.

Was your income of 2100 net?

How exactly is it to be understood that redeeming the land charge during follow-up financing causes higher costs?

Income is net and private health insurance already deducted.

Even if you buy from private, a development plan applies to the property. This plan often tends to lose its validity. In other words, you have no guarantee that the property will still be a building area in 3 years.

Where exactly can I find out about the validity? I have looked at the development plan and found nothing to that effect. According to the mayor, the properties must be built on within 5 years if they are purchased from the municipality.

If you choose a 5-year fixed interest period, you are either tied to the corresponding bank (which they are aware of) or you have to wait at least 5 years (rather longer, as you probably won’t manage to repay the loan by then). I think the model “first land – build later” is great because it gives you lots of time to consider everything. However, with your financial leeway, it is not that simple.

The interest rate lock is clear, but as I already wrote, building will start at the earliest in 3-5 years. If it actually were after 3 years at the earliest, the prepayment penalty according to the financial broker for the loan amount and the remaining loan term would be quite low.
I don’t fully understand the second part of your statement. Could you clarify that a bit more? We are aware that we won’t pay off the land within 5 years. It is also not the goal to have paid off the land before building the house. It is rather about securing the land, paying it off, and then building as soon as it is financially possible together with my girlfriend. Since I am clearly aware that I cannot manage such a project alone with my income.

Maybe as additional info: If my girlfriend actually becomes a civil servant, together we would probably have about 5000 net. The uncertainties regarding a timely tenure and a position nearby are known to us and well considered. However, for the field she studies, the outlook currently looks very good.

Thanks again for the extensive feedback!

Then the 5-year period will also apply to you, which is probably already running. It is best to ask the building authority. They can provide you with information.

The fixed interest period is clear, but as I already wrote, construction will start at the earliest in 3-5 years. If it were at the earliest after 3 years, the prepayment penalty according to the financial broker would be quite low given the loan amount and the remaining term of the loan. I don't quite understand the second part of your statement. Could you please explain that a bit more precisely? We are aware that we will not have paid off the plot within 5 years. The goal is also not to have paid off the plot before building the house. It is more about securing the plot, paying it off, and then building as soon as it is financially possible together with my girlfriend. Since I am clearly aware that I cannot manage such a project on my income alone.

Ok, I'll try again. To fully pay off the plot, you would probably need about 6-7 years. If you take a fixed interest period of 5 years, you would have a remaining debt that would then need to be refinanced (follow-up financing). However, this could be handled with the house construction loan so that you can start building exactly after 5 years. With this option, you could also choose any bank you want for the follow-up financing.

If you actually want to start building the house after 3 or 4 years, you theoretically have two options. You take out another loan for the house at the same bank, which could be quite expensive since you are at a disadvantage because you can't go to another bank nor contribute a large amount of equity. So you would have to expect the bank to charge an unusually high interest rate.

The second option would be that the bank lets you out of the loan early and you pay the prepayment penalty (not really much, but still a few thousand) and then take out a new loan. But then, the land charge must also be canceled and re-registered (doesn't cost a fortune, but it's not free either). Our bank made it very clear back then that it is at the discretion of management whether they release you from the loan early or not. Contractually, they are only obliged to release you from the loan if you want to sell the plot.

If you want the flexibility to decide which bank you go to for the house construction and when that should be, then you have to pay accordingly.

How exactly is it to be understood that releasing the land charge in a follow-up financing causes higher costs?

Creating and deleting land charges involves costs because a notary is always required for such matters, and the land registry office does not do this for free either. And if Bank A originally financed the property, and Bank B finances the remainder plus the house, usually the land charge from Bank A is deleted first, and then a completely new one is registered.