Anyone who builds a new house will almost always have to bear the double burden of continuing to pay rent and the financing costs for the new building project. We show you how you can reduce this double burden as much as possible.
Unlike buying a completed property, you have to pay the cost of a new construction project in installments. This starts with buying the land and continues with building the house. Until you move in, there are usually many partial payments to contractors, tradesmen, utilities, etc. an. Depending on the amount of available equity and the structure of the financing, construction period interest rates vary here. This is the name given to the interest you have to pay to a bank until you move in.
What are construction period interest?
Construction period interest is the interest you have to pay to the bank until the completion of the construction project. These sat down together from the interest for disbursed loan amounts and if necessary. accruing commitment interest. Depending on the agreement with the bank, at some point you will have to pay interest on the loan amounts that have not yet been disbursed, i.e. interest for the fact that the money has been made available to you. This commitment interest is a serious matter, because almost all banks in Germany charge an interest rate of 3% per annum for it – and thus sometimes three times what the loan itself costs.
The payment schedule is what counts!
Very few construction companies require payment at completion and handover in one sum. Instead, you almost always have to make partial payments. This is understandable, because a construction company has to make advance payments for material costs and wages. Who builds with an architect and many individual craftsmen, does not need to make so at all hope that he or. she gets the bill presented only at the end of construction.
Construction companies draw up a payment schedule in accordance with the Ordinance on Estate Agents and Property Developers (MABV). Building owners should at least have the building company roughly outline when payment installments are to be expected from the start of construction onwards. In the case of an architect's house, the architect or the craftsman should be the contractor. the architect to draw up such a payment schedule. On the basis of this payment plan can be determined then – at least approximately – when which payments are to be made and from where the money for it is to come and/or. from when it must be available. From this can be derived then again, how high the double burden can become.
By the way: if a construction company demands full payment only upon completion, this is not necessarily more favorable than payment in installments. Here it depends on whether and in what amount the construction company calculates a surcharge for this.
Loan interest but no repayment!
As soon as one euro is disbursed from a provided loan, you have to pay the interest agreed in the contract for it. This interest is calculated to the day at the end of the month and then collected from the account. During this disbursement phase, however, you "only" pay the interest on the disbursed amount. The repayment begins only after complete disbursement of the loan. With KfW loans or public promotion loans this can be also clearly after full disbursement ("redemption-free years").
If you want to save interest, the first thing you should do is use your own funds to pay bills. Only when these own means are used up, then the loans are taken up. But be careful: some banks agree on a minimum disbursement amount in the loan agreement. Whoever then "comes around the corner" with smaller bills must pay them if necessary. even expensive pre-financing (z.B. via an overdraft facility).
Commitment interest?!
Once a loan is approved by the bank, the clock starts ticking. The date from which you have to pay commitment interest is agreed in the loan contract. This is interest on the part of the loan that has not yet been disbursed by that date. In view of the generally low interest rates, the interest rate for this provision is quite steep, namely almost always 3% p.a. . One could speak of a historical interest rate, because the 3 percent was also charged 20 years ago.
This commitment interest can be avoided (or at least reduced) if the date is set as far into the future as possible. This is referred to as the "commitment interest-free period". Banks deal with this issue very differently. There are banks where this commitment interest free period is standard at, for example, 6 months. Who wants a longer time without Bereistellungzinsen, must for this if necessary. pay an interest surcharge. Other banks, on the other hand, agree on a "loan-free period" of 12 or even 18 months for a new building as standard – and without interest surcharge. But that's what these banks are for, if necessary. Already more expensive at the interest rate than banks with a lower FC-free period.
If you want to keep the double burden and the total cost of borrowing as low as possible here, you have to compare financing offers very carefully with each other. A loan with a long time without provision interest may end up being significantly more expensive than the offer with a shorter FC-free period. To be able to calculate this as accurately as possible, you need -see above- a precise payment and schedule plan.
This is all too complicated for you and you need advice? No problem! We would be happy to work out with you how you can calculate and reduce the double burden on your new building project. And we will also find the bank(s) that will make you the most favorable offer for your construction project – all things considered. To do this, simply contact us using our online inquiry form.