Real estate loan - bank's right to participate

Hello. We are planning to buy a demolition house. We cannot afford a direct new build.

Now we have the option to finance the remaining land through a regular bank loan. We are talking about approximately €50,000.

We also have the option to get a real estate loan at a significantly better nominal interest rate. This is even cheaper, including land registry entry and cancellation, than the regular bank loan.

The demolition costs about €30,000. But with a real estate loan, the lending bank is involved.

1. Are we even allowed to demolish the house then?
2. How high are the costs for the notary - land registry entry and cancellation?
3. I read everywhere 2% notary costs. But the land registry entry and cancellation for the bank as the lender are probably not yet included in that, right?

But with a real estate loan, the lending bank is involved.

No.

1. Are you even allowed to demolish the house then?

If you only provide the land as security and the bank is informed about this, that is acceptable to the bank and satisfies their security needs.

2. What are the costs for the notary - land registry entry and deletion?

Use a relevant calculator at Interhyp or wherever. There you get the costs calculated almost to the cent, including the land registry office. The bank costs nothing, only the notary and land registry for the mortgage.

Thank you. I discovered a calculator there. Mortgage registration = This is done when requesting a loan over €80,000. Then the lending bank is registered as a co-owner under the condition that if I repay the loan, they are then deregistered. Whether the property price has changed in the meantime does not matter.

The cancellation of the mortgage is then applied for by me at the bank. However, it must agree once I have repaid the loan. The notary then receives the cancellation approval and carries out the cancellation of the mortgage.

The costs for registering and canceling the mortgage depend solely on the mortgage amount (= loan amount).

Thus, a mortgage loan would make sense at the amount of €80,000, since the nominal interest rate is significantly lower and the registration and deregistration in the land register do not consume that again. Especially since otherwise we would take out 2 loans. 1. for purchasing the plot, 2. for demolition. And then at most one with mortgage registration would be possible because the second is otherwise too low. And hardly any bank does that. And the fixed costs of registration and deregistration also play a small role.

Is it even allowed to register a mortgage if you want to demolish the house, i.e. not directly when buying the property, but for example one year later?

If you thus only provide the land as security and the bank is informed about this, that is ok for the bank and its security needs.

The purchase price of the plot is including the house. However, the house is very expensive to renovate. So a negative factor. If the bank does not see it that way, then does the property price as security decrease? Or how does something like that work?

since the nominal interest rate is significantly lower

... and the term is longer. If you have to repay €80,000 in 84 months and then also pay 5% interest, that hurts.

Registration of a land charge = This is done when requesting a loan over €80,000.

The land charge has nothing to do with the loan amount. You can also secure a €20,000 loan with a €20,000 land charge (if the bank wants to do that).

The costs for entering and deleting the land charge are solely based on the amount of the land charge (=loan amount).

Based on the amount of the land charge, which is not necessarily identical to the loan.

Then the lending bank is registered as co-owner

No, you remain 100% owner. The bank only receives the land charge = security.

on the condition that if I repay the loan, it is then deleted again.

Let’s put it this way, you have a right to deletion for land charge parts no longer needed, but you are not obliged to have the land charge deleted.

Moreover, otherwise we would take out 2 loans. 1. for purchasing the land, 2. for demolition. And then at most one with land charge registration would be possible, because the 2nd would otherwise be too low.

Two financings are nonsense. Who is financing the new build? Whether the bank also offers small financings secured in the land register depends on the bank you ask.

Is it even allowed to register a land charge if you want to demolish the house, i.e. not directly at the purchase of the property but, for example, 1 year later?

You can do whatever you want whenever you want, as long as the bank cooperates. It is your property. And if you want, you can have a land charge registered for bank X over €10 million – no problem at all (though nonsensical).

The purchase price of the land includes the house. However, the house is very expensive to renovate. So a minus. If the bank does not see it that way, then does the land price as security decrease? Or how does something like that work?

How much does the house cost? According to your description, the value is purchase price minus demolition costs. What are you doing after the demolition? I am not really clear about what you are asking?

Hello. We are planning to buy a demolition house. We cannot afford a direct new build.

You cannot afford a new build. So why are you buying a property with a demolition house if you can’t build anyway? That should actually be the initial question: what do you want with a property with a house (that you want to demolish) and a loan if you have no money/get no money to build? I do not understand what that is supposed to mean...

Thank you very much!

Two financings are nonsense. Who is financing the new building? Whether the bank also offers small financings secured by land register depends on the bank you ask.

Insofar, two financings are a consideration, as we do not know what actual costs for purchase & demolition will come up. We have the purchase price and broker fees for sure. Then estimated notary fees for the purchase with figures from the internet, 2% of the purchase price. Then the property transfer tax. And we cannot even plan the demolition. For that, we first need to own the land and have the demolition contractor make an estimate – the estimate also costs money. And it is certainly not guaranteed. Therefore, we are initially planning only to buy optionally. With a small credit buffer & then have the estimate made and get the second loan.

How much does the house cost? According to your description, the value is purchase price minus demolition costs. What are you going to do after the demolition? I am not really clear what you are asking?

We are buying a property – that is a complete package of land and house. The description states that one can optionally also demolish the house – or renovate it. So the value cannot be determined. For us, however, the value equals the demolition costs + connection and completion costs (electricity, water). The question is therefore: How does the bank calculate the value of the land if we demolish the house? Then, from their point of view, it might even be worth less – not more.

You cannot afford a new building. So why are you buying a plot with a demolition house if you can’t build anyway?

The plot fits very well. There are only a few left here & we have no building obligation. We will then pay down the loan again for a few years. It will take 4.5-5 years. And then build equity again. That will take longer . Meanwhile, the plot serves as recreation with a bit of greenery. But nothing major is to be built there.

Owning land is not a bad idea in the zero-interest era. Actually, I want to advise you not to discuss all this here, but at your bank. It will work out fine. The bank just needs to know what you want. Demolishing a house costs around 10 thousand. The best demolition companies are the smaller, no-nonsense ones from the rough neighborhood near the freight yard. Karsten