Commitment Rates

  • 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...