Construction loan: Pay attention to the stand-by interest

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Craftsman services are currently scarce – there are often delays when building a house. Caution: If you call up a real estate loan later than planned, commitment interest may be incurred, which will make the loan noticeably more expensive. What you should know as a building owner about deployment interest.

Commitment interest is charged by banks on parts of a real estate loan that have not yet been called. They are practically a fee for having the money parked ready for the borrower to withdraw. As a rule, deployment interest is to be paid after a certain period, the so-called deployment interest-free period, often between three and twelve months, depending on the provider. The amount of the commitment interest also varies depending on the lender, on average it is around 3% per year. The delayed retrieval can make a building loan, which at first glance seem cheap, more expensive than planned. If the commitment interest is higher than the loan interest stipulated in the contract, it is even worthwhile to call up the entire building loan, even if the money is not needed immediately. However, this is not always possible because the payment is usually agreed in installments based on the actual construction progress. If a construction phase cannot be completed as planned, for example because the craftsmen cannot finish it on time, costs often add up to hundreds of euros.

When comparing construction loans, it is therefore important to also consider the amount of the commitment interest and the commitment interest-free period. As a builder, you should negotiate a long-term interest-free period with the lender, preferably twelve months or more. If you have loans from several banks, you should first call up the loan for which the interest-free period is about to end. Our tip: When looking for the right construction loan, it is best to consult an independent expert – we will be happy to help you!

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