Property financing - how to bring in equity?

Dear forum,

we are about to purchase a plot of land worth €245,000 (this includes all additional costs). The price is slightly above the standard land value.

Since we want to build on it only in a year, we would first need to take out a loan for the land.

We have just under €190,000 in equity.

Now the question arises as to how we can best use the equity. We have received various proposals from different advisors.

Without going into the details of the options (that would be beyond the scope) - the core approaches are:

1. use all the equity for the land purchase and take out a loan of €55,000 (variable interest rate or private loan)

2. use a smaller part of the equity (e.g. €50,000) and keep a larger portion of the equity in the savings account in order to use this portion later for the house construction.

Even though there is surely no "right" answer here, how would you proceed?

Looking forward to your advice

1. Use all equity for the land purchase and take out a €55,000 loan (variable interest rate or private loan) 2. Contribute a smaller portion of the equity (e.g. €50,000) and keep a higher equity share in the daily allowance account to then use this share for the house construction.

At the latest when building the house, the bank will say "equity in advance". Therefore, feel free to fully commit the equity (or keep a small part as a buffer in reserve, e.g. €10,000-20,000, then small invoices can be paid later from it). I see no added value in putting the money at 0,x (small x!) on the daily allowance account and on the other hand servicing a variable financing of 1-2%. Why was this advised to you? It's not professional.

Thank you very much! This opinion was actually not from our mortgage consultant, but from a general financial advisor.

In addition to the €190,000 equity, there are still reserves of €20,000 available, which are not to be included in the financing.

Many thanks for the quick response.

At the latest when building a house, the bank will say "equity capital in advance".

I cannot confirm that. We used our loan first and then applied the equity capital. It definitely depends on the bank and the equity ratio.

We first used our loan and then applied the equity.

This is the exception and not the standard, but occasionally possible.

e.g. €10-20k, then small invoices can be paid with it later

"Small invoices"... What a wonderfully charming euphemism

I would do it exactly as proposed by . I'm not a proponent of emergency liquidity, safety buffers, etc. anyway – but I've also explained that elsewhere before.