You have decided on your own four walls, you have already found the right property and the right financing offer is available. So that you can access your entire loan at any time during your construction project, the bank will provide you with the entire amount of the agreed loan from the beginning. For your bank, however, this means that they can not make a profit with the money during this time. In such cases, banks charge the so-called commitment interest .
In fact, the bank raises interest on money that you do not yet use. Why this is so and what ways there are to keep the deployment rates low, you will learn in our contribution today.
What are deployment rates?
Commitment interest rates are at first glance a difficult-to-implement additional issue for builders .
These interest rates apply to loans the sum of which is not needed immediately after the financing has been completed . The bank compensates for the time during which it can neither invest the money profitably nor lend it otherwise as a loan . In general, the commitment interest amount to 2 to 3 percent a year. In the long term, this can lead to significant additional costs , especially if the construction project takes longer than planned. Since a loan from the bank is always earmarked , you can not avoid these costs by having the whole loan paid out at once.
However, many banks give their customers a non-provisioning period in which they still do not charge interest. The delivery-free time can be up to twelve months.
How to calculate commitment rates?
In order to calculate the commitment interest , the loan amount not yet used is used as a basis. Depending on how far the construction project has progressed, the basis of calculation may be the entire loan or a partial amount. This amount is then multiplied by the provision rate.
You will take out a loan of 250,000 euros from your bank on 1 August. 3 months later, the contract-free period ends according to the contract. At this time, the balance is still 75,000 euros. From now on, every month you do not use the loan will incur 0.25 percent interest on the money.
75,000 euros x 0.25 percent = 187.00 euros per month
(75,000: 100 x 0.25 = 187)
How to keep the provisioning rates low?
Negotiate Loan Terms: Search the conversation with your bank adviser to negotiate the terms of the loan. If you have a good credit rating and a little negotiating skills, you may be able to negotiate with your bank for a longer non-provisioning period .
Extend deployment-free time: For an extra charge , some banks talk and extend the time off the deployment . Whether it is better to pay the commitment interest or to pay a premium on the borrowing rate of the entire funding must always be considered on a case-by-case basis. This approach should be discussed individually with each bank and at best with their BSP financial partner in advance.