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philipp199024 Aug 2019 10:06Hello everyone, we are Ina and Philipp. We both want to take the next step and build our own home.
We are intentionally moving away from the big city back to the countryside (Ina comes from a rural area). Perhaps some of you remember we have posted here before and shared some bad experiences with looking for land. Thanks to your advice, we quickly figured out what to watch out for. We want to actively share our journey toward homeownership here and are grateful for any tips and tricks.
What is the current status?
We are currently in contact with an owner (over 70 years old) of a plot of land who is willing to sell us 1,400 square meters (15,070 square feet) for 50,000 euros. All utility connections except for gas are already available at the site. The land is currently farmed as agricultural land. The plot is located next to a low-traffic federal road.
Yesterday, we spoke with potential neighbors. They also bought from this gentleman in 2011 and are still very satisfied with the quality of living and housing in the area. The neighbors were in the same situation back then—the land was also used as farmland.
Next Tuesday, we have an appointment with the bank. We will discuss whether to finance the land or possibly pay in cash. The advisor told us on the phone yesterday that we should generally consider paying for the land in cash rather than financing it.
If everything goes well, we will call the owner on Tuesday and hopefully tell him that we want to buy the land. He said yesterday he would then send us all the documents.
We have a specific idea we want to realize: a bungalow (the neighbor’s house is already a bungalow) modeled after a Swedish-style home.
Currently open questions:
Do you already have any advice on what we should pay attention to?
I (Philipp) have some doubts and would prefer to finance the land because the €50,000 should serve as equity/reserve for building the house.
There is a sewage access point right at the edge of the property. The owner said—if I understood correctly—that he would also talk to the water utility company to see if we would not have to buy that part of the land.
Thank you very much for reading this far. We wish you a nice weekend and will continue to report here openly and regularly. We appreciate any feedback or suggestions on things we can clarify early on.
We are intentionally moving away from the big city back to the countryside (Ina comes from a rural area). Perhaps some of you remember we have posted here before and shared some bad experiences with looking for land. Thanks to your advice, we quickly figured out what to watch out for. We want to actively share our journey toward homeownership here and are grateful for any tips and tricks.
What is the current status?
We are currently in contact with an owner (over 70 years old) of a plot of land who is willing to sell us 1,400 square meters (15,070 square feet) for 50,000 euros. All utility connections except for gas are already available at the site. The land is currently farmed as agricultural land. The plot is located next to a low-traffic federal road.
Yesterday, we spoke with potential neighbors. They also bought from this gentleman in 2011 and are still very satisfied with the quality of living and housing in the area. The neighbors were in the same situation back then—the land was also used as farmland.
Next Tuesday, we have an appointment with the bank. We will discuss whether to finance the land or possibly pay in cash. The advisor told us on the phone yesterday that we should generally consider paying for the land in cash rather than financing it.
If everything goes well, we will call the owner on Tuesday and hopefully tell him that we want to buy the land. He said yesterday he would then send us all the documents.
We have a specific idea we want to realize: a bungalow (the neighbor’s house is already a bungalow) modeled after a Swedish-style home.
Currently open questions:
Do you already have any advice on what we should pay attention to?
I (Philipp) have some doubts and would prefer to finance the land because the €50,000 should serve as equity/reserve for building the house.
There is a sewage access point right at the edge of the property. The owner said—if I understood correctly—that he would also talk to the water utility company to see if we would not have to buy that part of the land.
Thank you very much for reading this far. We wish you a nice weekend and will continue to report here openly and regularly. We appreciate any feedback or suggestions on things we can clarify early on.
philipp1990 schrieb:
Building land, which would sell us 1,400 square meters (15,070 square feet) for 50,000€philipp1990 schrieb:
Currently, the area is used as farmland.About €35 per m² (about $3.25 per square foot). Are you sure it is building land (including all natural and legal conditions necessary for construction)?Paying for the plot directly from your own equity has the advantage that you can plan at your own pace, calculate the financial requirements, and then have the mortgage lender register the loan with the appropriate amount as the first charge on the title. The downside is that your equity is (almost?) used up, which might cause problems with the bank regarding reserves and conditions that are not included in the financing.
Plot purchase financed through a mortgage lender: in this case, you should already know the financing amount and negotiate a long commitment period. As long as you stick to the agreed amount, there is no problem. A difficult situation, as described by Bookstar, would be financing the plot through Bank A and having Bank B in second position for the house construction loan, which can become very expensive.
However, with 50,000, I could imagine the following scenario since completion will probably take about 18 months: assuming a savings rate of 1,500 Euro per month, you pay 30,000 from your own equity and take a small loan for 20,000, which you repay within 18 months. After that, the house is finished and you start paying your regular mortgage installments. When financing, the plot is counted as equity, minus the small loan.
Plot purchase financed through a mortgage lender: in this case, you should already know the financing amount and negotiate a long commitment period. As long as you stick to the agreed amount, there is no problem. A difficult situation, as described by Bookstar, would be financing the plot through Bank A and having Bank B in second position for the house construction loan, which can become very expensive.
However, with 50,000, I could imagine the following scenario since completion will probably take about 18 months: assuming a savings rate of 1,500 Euro per month, you pay 30,000 from your own equity and take a small loan for 20,000, which you repay within 18 months. After that, the house is finished and you start paying your regular mortgage installments. When financing, the plot is counted as equity, minus the small loan.
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philipp199024 Aug 2019 10:58Bookstar schrieb:
Make sure to buy the land outright, otherwise the mortgage for the house will be more expensive because the first lien is occupied. This can result in an additional cost of five figures!