Mortgage structuring for new construction

Real Estate
1

Hello All,

We are in the process of finalising the deal for a new construction house which would be ready by Feb 2026 (possibly earlier by Nov 2025).

The payment plan mentioned by the seller is -

  1. Reservation (by mid-April) - 50k
  2. Notary (by mid-May) - 20% of the house value minus 50k paid during the reservation
  3. Rest of the amount - 10 days before key handover

We are planning to put 10% cash and pledge 10% from the Pillar 2 (pension fund). So, the bank will need to provide the 10% amount during the notary in the next few weeks.

So, for the mortgage structuring -

  1. Would we have to take 1 tranche for the 10% amount right now and the other tranche(s) later when the house is ready?

  2. If point 1 is right -
    a. Does the interest and amortisation for tranche 1 start immediately after the notary?
    b. Given that the house might be ready between Nov 2025 and Feb 2026, do we need to fix the date for the payment of the later tranche(s) now or it can be flexibly done later?

  3. Assuming we take tranche 1 now, when do we need to fix the interest rate for the other tranche(s) - now or when the house is ready?
    a. In case we wait to fix the interest rate later, I guess there a disadvantage to negotiate the interest rate.
    b. In case we fix the interest rate for all the tranche(s) now, there might be a premium for the forward fix of the interest rate?

Just reading the threads here is helpful; hope to get more insights into the specific case if anyone has been in a similar situation.

2

I realise the above was possibly written in a complex manner, and hence I will try to simplify.

The seller is asking for 20% of the house value during the notary which will take place 6-8 months before the construction is completed. My plan for 20% payment is - 10% cash + 10% Pillar 2 pledge. So, the bank will need to pay 10% during the notary.

I had a discussion with a bank today - they say that that the transfer of ownership will happen after the construction is completed and that the bank can only disburse the mortgage after the transfer of ownership. So, in effect, asking us to pay 20% cash right away.

Bank’s suggested solution - Ask the seller to take 10% right now and 90% after the construction.

Any other suggestions to not pay more than 10% cash for the notary would be welcome.

3

Gm,

Reservation payments are optional and negotiable.

You can pledge 2nd pillars (instead of withdrawing) and have the bank cough up the corresponding 10%.

Interest starts the day you have an effective loan balance. Repayment according to schedule (perhaps half a year after key handover. Ask about this, it will vary)

Whatever you fix depends on your risk tolerance and willingness to carry upside rate risk - you could fix it now, or obtain a variable one until further notice with the option to move to a fixed rate later. Up to you.

4

Got it from 2 banks that no mortgage can be transferred till the transfer of ownership is done. So, pledging Pillar 2 at this stage will not work and the 20% will need to covered by own funds.

Another bank said you pay by own funds - they will reimburse us 10% when the transfer of ownership happens and the rest 80% goes to the seller at that time.

This is the most probable solution; will need to speak with the seller for 90:10 instead of 80:20 at this stage.

5

I wouldn’t mention this being possible if I hadn’t had first hand experience about it.

Go find another bank.

6

No bank will pay out a mortgage before transfer of ownership. Waste of time to find one that will.

This is a problem that can only be resolved by talking with the construction company. Explain the issue and either agree on 10% or that they will transfer ownership at the notary.

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7

The seller is ok to do a 90:10 split; confirmed verbally and now awaiting his written confirmation.

The only other option that I got from 1 bank is what I mentioned previously

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