Experience financing according to construction progress

Hello everyone,

we are currently right on the verge of financing a house 160,000€ + 220,000€ renovation - 150,000€ equity; so 230,000€

The best bank offer so far is 20 years variable interest at 0.85% with Hypo Vereinsbank. Most others start at around 1.1%. The whole thing is now ready to be signed, but we are still hesitating whether we should switch to a local Sparkasse / VR-Bank.

An important point is that the loan is to be paid out in up to 7 installments according to construction progress. Our cost estimate, which breaks down the 220,000€, has been accepted.

Has anyone had bad experiences with this type of arrangement? Is there to be an attitude of refusal from the bank if, for example, a trade's invoice costs a bit more or a bit less than in the original estimate? We just don’t want to be unable to pay an invoice because of that and the bank charging us provision fees on top of that at some point.

This is actually the absolute normal case. You submit invoices, the bank pays out. Anything else would also make little sense, both for the bank and for you.

Well, how are other banks supposed to disburse? Payment according to construction progress is the usual practice. The advantage of a local bank is of course probably a significantly more flexible approach. But that of course costs more - your mortgage bank only touches the loan 7 times and not maybe 40 times, like a [Volksbank/Sparkasse].

We are with HVB ourselves. The 7 payments are a guideline, but more are also possible. Just no small amounts.

We were also told to bundle invoices so that no small amounts have to be paid out. There are two options for this: advance the money and submit invoices starting from a sum of 5k euros to receive money, or apply for an advance of about 5k euros and then submit the invoices and prove expenses.

How much commitment interest do you have to pay? They were the same for us as with other offers.

The described procedure is absolutely normal. The bank is not interested in whether an invoice deviates from the cost estimate or not.

Ah, thank you very much already. Then I guess I am worrying too much. Bundling invoices is clear, but sometimes you get a discount for quick payment from the craftsman - then you probably have to advance payment as best as possible. The commitment interest is 3% p.a. from the 12th month. Hopefully that will be sufficient.