Should equity also be used?

Hello and good day!
We belong to the faction "money is no longer safe in any bank" and now want to (also for this reason) but also long wished, to build a house.
We have already found a suitable plot (2,000 sqm/90,000€) (not yet purchased, but certain) and want to pay for it from our own funds (total approx. 250,000€, but also untouchable parts like company pension, etc.) BEFORE we apply for the loan... Is this a mistake in thinking, but as far as I know, the plot then also counts as capital, right..?
We now had an independent financial broker here who helped us very, very much to organize everything and uncover all hidden finances...
She has now, however, proposed a model in which a large part of the equity stays in the bank (approx. 100,000€) and we should take out a loan of about 210,000€, because we are currently closing under 4% interest and our (old) contracts partly bring up to 5%... In addition, she advises us against a SAB loan for various reasons (whatever they may be, probably because they don’t pay commission :confused , even though we would fall into the "inner-city development promotion" 85,000€ at 2% (!) ...
Overall, this somewhat misses our wish to secure the money we have hard earned (not an inheritance) in case of a possible bank crash... even if that may sound silly...
My question: is it usual to leave so much money lying around when building a house..? The lady is very likeable to us, but of course it is clear that she mainly earns from a loan (depending on the amount)...
That is why I have doubts, my dearest is trusting her blindly...
I am grateful for all answers, also experiences.
Best regards fly

The paid land counts as equity.

The SAB loan (fixed for 20 years at 2% - if a child is taken into account) is very affordable and I would of course take it. If you are able to keep a liquidity reserve (10 to 20,000 euros) that is totally fine. But not as much as suggested by the financial salesperson. Unless it is certain when the next large amount will be needed.

Basically, before buying the land, it should be ensured that the overall project is financed. So that you are not stuck with the land and it cannot proceed further due to loan rejection.

Remember that all advisors are just sellers. A true advisor sells nothing but charges a consulting fee for their service - like [Verbraucherzentrale] or [Honorarberater]. Only then can one be advised free of commission interests.

Hello Georg,
thank you very much for the reply! So we were not wrong about the property...
Yes, she would receive a fee from us... but only for a brokered loan.
Probably stupid that she told us if SAB - we have to do it alone.. Otherwise, she gets 2% on the brokered amount...
The financing is relatively secure, according to her statements we don't have to worry. We will now hold back an amount of about 30K, then we are probably on the safe side...
Best regards fly

Hi,

yes, with 30 thousand euros in reserve you definitely have enough to comfortably cover any additional costs.

Hello,

We will now withhold an amount of about 30K, then we are probably on the safe side...
Best regards fly

Typical ancillary construction costs, which should be considered in every house construction/financing calculation:

1. Land

- 5% real estate transfer tax - varies by municipality
- possibly broker fees, approx. 3.57% of the land price – varies by municipality
- approx. 1.5% notary fees, calculated from the land price
3 x entries in the land register (1. preliminary notice of conveyance, 2. transfer of ownership, 3. entry of the land charge)

2. Financing

- possibly advisory/closing costs for financing, approx. 1.5% of the total loan amount
- approx. 0.25% commitment interest, based on the loan amount

3. Construction preparation

- approx. €2,800-€3,200 surveying services (qualified site plans / height surveying / staking out / building surveying)
- provision of connections for construction water / construction electricity, approx. €6.00 - €8.00 rental for standpipe/day, approx. €300.00 rental for construction electricity meter plus consumption
- fees (for house number, drainage permit, building permit), approx. €1,000.00 – €1,500.00, varies by municipality
- builder’s liability insurance approx. €80 - €150.00/year, depending on insurance company

3. Earthworks

- removal of excess soil (normal soil conditions) for basement, approx. €1,500.00
- internal development (wastewater/stormwater pipes), approx. €2,500 – depending on pipe routing
- inspection shafts, infiltration trench or soakaway shaft, approx. €1,900.00 - €2,200.00
- reserve for foundation ancillary costs approx. €8,000.00 for soil replacement and/or similar

4. House connection costs

- electricity/gas/water/telecom, connection to the sewer system, approx. €8,000.00 - €8,500.00 - varies by municipality

5. Fees

- acceptance of the drainage pipe, approx. €150.00 - varies by municipality
- chimney sweep (acceptance of the chimney / gas system - note the fee is charged twice), approx. €200.00 - varies by municipality
- land registry office (transfer of surveyor’s data into the land registry map), approx. €150.00 – varies by municipality

Total approx. €35,000 - €40,000

THE REQUIRED FUNDS FOR FLOOR COVERINGS, PAINTING WORK AS WELL AS OUTDOOR FACILITIES ARE NOT YET CONSIDERED IN THIS LISTING!

Kind regards

Hello again, thank you for the detailed list! It’s always good to talk to experts... Regarding 1.) We negotiated the land price including ALL additional costs down to 100,000 € and will cover that upfront from cash on hand. Regarding 2.) We would probably completely finance SAB and KfW, what are the closing fees there? (if anyone knows) Regarding 3.) The house number is already assigned.. about the garden shed..? Thanks for the insurance reference value, but you only need that from the start of construction, right? Regarding 3.) Soil replacement, when is that done?? And these shafts don’t belong to the actual house?... or is that the sewage shaft? Phew, I need to write this down for questioning the construction companies... Regarding 4.) Energy (including three-phase current) and water are theoretically already in place (in a garden shed), but we will probably have to dig up the old water pipe during construction. Should we take this opportunity or rather do the complete development upfront? We have calculated 12,000 for the entire development... Does that fit? Thanks a lot in advance and best regards! fly