variable loan yes or no

Hello everyone,
we want to build in spring 2016. At the moment, we are actively gathering offers and have two construction companies in close consideration. Since we have not yet decided which construction company it will be, we cannot set up a proper construction financing. However, the land price must be transferred to our municipality by the end of January 2016. Now my question: Would it make sense to first take out a variable loan and only later arrange the complete construction financing?

How flexible should the loan be agreed upon to cover all uncertainties in house construction? Starting with additional foundation costs and ending with so many tempting nice to have

Rhenish greetings from the road
Construction expert

Only the financing part for the land is supposed to be variable. But if you start building soon, in my opinion, it doesn't make sense. Can't you pay for the land with equity or adjust your long-term financing to your budget or the offers from the two companies? Both companies will presumably have submitted similar offers. For the bank, the offers should be sufficient.

We only want to finance the property first with the variable loan; it is about €60,000. Our equity is not sufficient. We want to apply for the KfW funding from 01.04.2016, but we still have to wait because the interest rate has not yet been announced. That means, even if we conclude financing with the help of the offer prices, the KfW funding would still be missing. Isn't a variable loan more sensible? I am grateful for any answers.

I consider a variable "bridge financing" for the property to be sensible. Apart from the fact that it is not yet foreseeable how long the supplier selection will take and when they will start construction.

For us, the land purchase was in April/May 2013. The first talks with construction companies began in February/March 2013 and the contract was signed in April 2014. Construction then began at the end of April.

However, you have to expect that the lending bank will register itself in the land register. Accordingly, this would possibly have to be removed from the land register again upon repayment by the later financing bank so that the other bank comes first = higher cost. Maybe you have the possibility/arguments to get the variable loan without land register entry.

By the way, we are still continuing our variable loan because we are taking advantage of the current interest rate situation for higher repayment. With the variable loan, you remain flexible in your choice of banks. However, I cannot assess the current interest rate (interest advantage) for you, as my variable loan runs through the employer (therefore no land register entry was made in our case).

We only want to finance the land first with the variable loan, it's about €60,000 there, our equity is not sufficient. We want to apply for the KfW funding starting from 01.04.2016, but we still have to wait for that as the interest rate has not yet been announced. That means, even if we conclude a financing with the help of the offer prices, the KfW funding would still be missing. Isn't a variable loan more sensible? I am grateful for any answer.

Under these conditions, it really makes sense to look into a variable financing. Depending on the amount of financing, you might also manage without registering a land charge and find a bank that a) grants a consumer credit/overdraft credit (which are not really expensive and also without securities/fees) or b) grants a variable construction financing with positive/negative declaration.