Avoid commitment interest - 100% loan payout

Hello everyone,

things are becoming more concrete on our side as well, we have an extremely good financing offer in our view, which we would actually like to accept, but we still see one catch:

Total costs house/land: 580,000 euros
Equity: 380,000 euros (+buffer, but we are not including that in the financing)
Loan: 200,000 euros
Conditions: 15 years full repayment, 5% special repayment option p.a., 1,167 euros monthly rate, 0.55% effective annual interest rate.

Problem: There are only 3 months without commitment fees, after that 0.25% per month = 3% p.a. commitment fee. Payment to the general contractor is based on construction progress, majority in spring 2020, final installment only in October 2020. That means from the 4th month 0.25% x 200k = 500 euros per month commitment fee, and that potentially for 12 months (although towards the end of course the undrawn amount decreases and thus the 500 euros will also go down).

The bank advisor then said that the loan could simply be paid out to a construction account after 3 months and left "there," so that we would not have to pay the 0.25% commitment fee per month, but only the agreed 0.55% interest per year. There is also enough buffer to start with repayment already.

Does something like this actually work "just like that"? What is the point of the commitment fees if you can simply avoid them like this? Or are we fundamentally misunderstanding something?

Thank you very much for a brief assessment in advance!

P.S. It is a larger, local bank.

Aren't 0.55% more than 0.25%?

But we did it that way too, instead of provision then immediately interest and repayment. It's just a higher monthly burden, but you feel better when the term shrinks!

Get it in writing. Otherwise, I wouldn’t bet that €200,000 will be paid out as a blank check. After full disbursement, repayment usually begins. Keep that in mind in your liquidity planning. Marvin, 0.25% per month, not per year

Aren't 0.55% more than 0.25%?

0.55% interest per year for the loan
0.25% per month commitment fee

Aren't 0.55% more than 0.25%?

0.25% PER MONTH is slightly above 0.55% PER YEAR

The bank advisor then said that the loan could simply be paid out to a construction account after 3 months and "left there," so that we would not have to pay the 0.25% commitment fee per month, but only the agreed 0.55% interest per year. There would also be enough buffer to start repayment already.

Is something like that actually possible "just like that"? What is the point of the commitment fees if they can be bypassed so easily? Or are we fundamentally misunderstanding something?

Why should the bank pay out a loan if it has no security? Then the deposited money would have to be pledged to the bank. Release only after coordination with the bank. This also causes effort and costs for the bank. Or find a bank that offers a longer free period – but they calculate this into the interest. The bank does actually incur costs when it grants you a loan, even if it is not disbursed. For example, equity must be provided.

But as always: asking helps, maybe they will accommodate you given the still good financing ratios.