Construction financing in cash - which account?

We are in the fortunate position to be able to finance the new house in cash through the sale of our old house.

The prefab house company now demands that, for financing security, we deposit the money into a special account that meets the following requirements:
- Money can be withdrawn by the construction company with my consent (according to construction progress)
- The money is basically pledged to the construction company, so I cannot withdraw it without further ado (as security, understandably).

Does anyone have experience with and/or tips on this procedure?
Specifically, what type of account is best suited?

Of course, we would prefer to deposit the money in a suitable online overnight money account, which usually does not meet the conditions.
Accounts at local banks/savings banks, on the other hand, offer only a minimal interest rate, if any at all, and may even charge fees.
These are already differences of several thousand euros over the entire term.

I am grateful for any tips...

To be honest, I find the company's demand on the one hand strange, on the other hand partly understandable.

Understandable: Many companies also want a financing confirmation from which it can be derived that payments only go to them.
This whole thing probably goes in the direction: In the case of a loan, the bank makes sure that the money is paid to us earmarked. In the case of a credit balance, the owner can dispose of it at any time.

Strange:
In theory, you could also decide to invest your money for a 6 - 7 % return and take out a loan at 3 %. Yes, yes - I know - a return of 6 - 7 % is considered utopian with reasonable security, but it would be possible.

Personally, I would resist that - I don’t like such restrictions. What happens if the company messes up and after long back and forth you commission another company to complete/fix the errors? Then you can’t dispose of your credit balance because the first construction company has to agree (they will be very reluctant).

Thank you for the answer!

> In theory, you could also decide to invest your money for a 6 - 7% return and take out a loan at 3%.
> Yeah yeah - I know - a return of 6 - 7% is considered utopian with reasonable security, but it would be possible.

6-7% certainly does not exist with 100% (or at least 99%) security, and of course I cannot gamble with the house money in some emerging markets.
In addition, the money must be available on short notice, since it is not yet clear today how long the construction phase will last exactly.
So no fixed deposit for 12 months, securities, etc...
From this perspective, 1.3% (daily allowance with a downward trend) is already the limit, and even with construction financing interest rates of 2%, we would make losses.

> Personally, I would resist that - I don't like corresponding restrictions.
> What happens if the company botches the job and after a long back and forth another company is commissioned with the completion / the error correction?
> Then you cannot access your balance because the first construction company has to agree (they will be wary).

Of course, the restriction is unpleasant, but with every other construction financing, the procedure is analogous.
A bank does not pay the loan amount into my account either, but directly to the developer after proof.

Regarding botched work: I also have to agree to the release of the money, so no money will flow if the result is not right.
But right, in an extreme dispute case, if you want to part ways with your detached house builder, the money can possibly be "trapped" in this account for a long time.

However, I do trust our house builder at least to deliver a house; for the hassle with defects there is then a (unfortunately not particularly large) buffer at the end.

The demand of the construction company is understandable, but for me a deal-breaker. You hold the longer cash lever, unless the contract stipulates otherwise.

And briefly for my understanding:
The direct bank, which offers such great interest rates, does not want to have any effort (work) for it.
The local bank gives lower interest, provides extras (pledging, liability in case of damage, etc.) and also charges money for this effort? Outrageous!

And just briefly for my understanding: The direct bank that offers such great interest rates doesn’t want any effort (work) for it. The local bank gives lower interest, provides extras (pledging, liability in case of damage, etc.) and still charges money for this effort? Outrageous!

I think he meant this more generally – in the sense of: "I would rather invest it with a savings bank offering 1.XX% and withdraw it when needed (for bill payment) than with a 'local bank' with 0.1% interest." Although the local bank still doesn’t pay the 1.XX% – even if it doesn’t provide additional extra services (aside from accessibility, advisor around the corner, etc., which does cost the bank some money) It is somewhat understandable that one wants to invest their cash in a way that it produces a little extra. But since the direct bank doesn’t offer corresponding additional services, it would be ruled out as a possible choice. There is simply no such thing as a magic all-in-one solution.

Thanks for the answer!

> In theory, you could also decide to invest your money for a 6 - 7 % return and take out a loan at 3 %.
> Yeah yeah – I know – a 6 - 7 % return is considered utopian with reasonable security, but it would be possible.

6-7% certainly does not come with 100% (or at least 99%) security, and I can’t gamble in some emerging markets with the house money, of course.
Furthermore, the money must be available on short notice because it is not yet clear how long the construction phase will last.
So no fixed-term deposits for 12 months, securities, etc...
From this perspective, 1.3% (overnight money with a downward trend) is already the limit, and even with construction financing interest rates of 2% we would make losses.

Regarding the theory, I’ll send you a private message, which should in no way be seen as advertising, advice, or anything similar. I did this myself back in 2013, but it requires appropriate knowledge in reading balance sheets, gathering information, evaluating, etc., as well as weighing chance and risk.
It should only show – many things are possible if you deal with such matters accordingly (for me now for > 20 years).