Register a land charge and increase/change it later?

Hello everyone,

we want to buy a plot of land soon and need to finance a small part of it.

The repayment would be completed in 2 or 3 years. The plot of land should then also be used as equity for the later house construction plus additional capital. However, I am unsure whether it makes sense to finance this through a land charge or possibly take a regular loan with a higher interest rate.

If I see this correctly, I would have to bear the costs for registering the land charge once when purchasing the plot (around €900 for notary and land registry entry) and increase it later for the house financing, which would again cost around €2,000 (according to a calculator online). Or is a later increase of an existing land charge cheaper?

In my calculation above, the interest advantage of land charge financing would no longer be relevant, as I would save more with the later total registration without an existing land charge. If I wanted to do the house financing with another bank, I could possibly also save the deletion. Although this case is relatively unlikely.

Am I seeing this correctly or do I have a flaw in my thinking here?

Best regards
Chris

A deletion of the mortgage is then not due, as it will be cost-effectively assigned if it is no longer drawn down. You will not be able to save mortgage costs, nor will any additional costs arise. Registered and paid-off mortgages will then be used proportionally for the further requirement, utilized, and reduce the new mortgage requirement to be registered.

What amount are we talking about and how do you envision the repayment/repayment amount?

Hello, one possibility is the [Grundschuld Abtretung]. Usually, banks do this among each other. They are not obligated to do so. This means for you, if you finance the subsequent loan externally, you bear the risk of cancellation and new registration. The financing bank is only obliged to issue a cancellation approval. How high is the amount to be financed? There are also cheap installment loans.

An assignment of a usually registered non-documentary land charge for the financing of the property will be accepted by the banks 99.9% of the time.

I see the risk of the duty to delete as close to zero, accordingly also the risk that the registered non-documentary land charge cannot be assigned or transferred, provided it is no longer outstanding!

Can you offer the bank anything else as collateral? LV policy? Bonds? Maturing savings contract? Then the interest rate difference shrinks enormously. Example with us: annuity loan secured by land charge, 1.25%. Consumer loan due at maturity, silent assignment of a LV policy, 1.75%. That’s how we financed our house. 50/50. The LV arrangement will pay in this year and will repay half of our debts. Do you have something like that? Then use it for the land and leave it unencumbered. It’s then fully yours. And you know, having is better than needing. If you don’t have something like that, and we’re talking about 20-30 thousand euros loan requirement, talk to the bank about what else they can come up with. The notary and court fees you mentioned I consider excessive, where did you get those from? Karsten

Thank you for the numerous responses.

The following assumption:

Purchase price: 55k
Mortgage to be registered: 20k

Total costs: 1,271.44 euros

The notarization of the purchase contract is already included.

Now we would then proceed with the home financing. The mortgage would have to be renewed. New mortgage, roughly estimated 250k
Old mortgage 20k

Costs for new registration and cancellation: 1,607.14 euros
Costs for assignment: 180.83 euros

Whereas the assignment only works if I choose another bank, right?

Now the calculation if I have no mortgage on the property:

Land purchase: Total costs: 973.44 euros
Mortgage home financing: Total costs: 1,489.98 euros

Savings of around 416 euros

With the true construction costs and mortgage registrations, it will of course be correspondingly more expensive.

Now we come to the actual nonsense:

The land financing with a mortgage would have to be done via a regular construction financing. With the ridiculous amount of around 20k, the interest rates are ironically really high. Banks want to earn something...2.79% for example Postbank. 5 years term, no special repayment, max 5% repayment? ultimately 5k euros interest...lol.

Simple installment loan, 3.7%, repaid after 3 years, rather earlier, interest around 1.6k.

My house bank generally rejects this small land financing with a mortgage because the amount is too low. Therefore, we simply do it via an installment loan and that’s that.

Some people probably shake their heads why I make such a fuss over a few euros. But that’s a short vacation, nothing comes from nothing