Rebuild again, despite existing real estate financing

Hello everyone!

The situation is as follows:

We bought a house almost 5 years ago. Now we would like to sell after 5 years and, for various reasons, build a new one. Purchase price back then was 250,000 euros plus additional costs. Estimated value according to the local bank and the resident real estate agent is 310,000 euros. Trend for the next 5 years is rising, due to the top location.

Remaining debt in 5 years will be 150,000. Our idea now is to sell profitably in 5 years, and after 10 years no prepayment penalty has to be paid.

Our question is how do you carry this out, or how does this work in practice? Do you even get a new loan? Usually you sell the house beforehand, in order to possibly buy the land already. I’ve heard something about bridging loans? Does anyone have experience with that?

Another question: I will be nearly 40 in 5 years. My wife will be 37. Children at that time 13 years old. Would you start something like this again at that age? I retire at 55. If we sold the house well, we would have 170,000 euros profit plus 20,000 savings after deducting the remaining debt. That would be a good starting point, wouldn’t it?

I hope for honest and constructive opinions.

With that in mind, best regards and thanks in advance

The initial situation is clearly not bad, because you have correctly recognized that you have about €150,000 of equity. However, I wouldn’t assume more for now, because you also have to bridge a year of double costs, interim financing, etc., and it is unclear whether the property will be worth that much in 5 years when it is another 5 years older (“more worn out”). No offense meant

The interesting question is what your new build will cost and whether you can pay off the new build by the time you retire in 15 years. Does that add up? Also think about price increases.

Interim financing, etc. is not a problem at all, but there are other experts here who can explain that better.

Hello, you can also request a change of object which is cheaper than the prepayment penalty.

You want to build in five years? Or right now? I didn’t quite understand that. You just have to arrange the "Überlapp" if the old house isn’t sold yet and the new one is not finished. Moving into a rental apartment in the meantime... I probably wouldn’t feel like that.

Hello, thank you very much first of all for your help!

We would like to build new in 5 years. Yes, but how is that best done? Ideally, the new house would be finished, and we could sell the old one at the same time or arrange this with the new owners accordingly.

Hello,

there are several options:

1) build immediately! To avoid paying a prepayment penalty, you take over the old loan for the new house (which then runs for another 5 years), and if anything is missing, you include it in a new loan (ideally also with only a 5-year fixed interest period, so that you can arrange the follow-up financing at the same time). To bridge the costs (i.e., until you get the money for the old house and can build = interim financing, which your house bank offers you. It is repaid with the sale of the old house).

Advantage here: - new house immediately - no prepayment penalty - cheaper construction costs! (in 5 years they may be higher!) - cheaper land prices (in 5 years they will be much higher... in metropolitan areas land prices increase by 10-15% per year!!!!)

Disadvantage: - possibly an interest surcharge if you then do the follow-up financing!

Possibly, you could make a deal with your house bank here = they don’t charge a prepayment penalty, and you then pay a slightly higher interest rate, but immediately for 15 years!

2) build in 5 years!

Advantage: - no prepayment penalty = all banks are available - newer technology in house construction than now

Disadvantage: - higher construction costs (currently, the craftsmen add 5% every year, and that every year!!!) - higher land costs (see above, depending on location the land can cost 50% or more in 5 years than today!) - probably higher interest rates than today!!! - you don’t know how much price increase your house will have in 5 years

Now I would weigh everything up, with the advantages and disadvantages for you.

PS. If the bank/real estate agent currently estimates your house at 310,000 EUR, you could try to sell it immediately for 330,000-350,000 EUR. That means immediately taking into account the price increase of the next 1-3 years!