Provision interest - loan amount

since it could have been very simple: pay out the MHB loan first and done. Annoys us in hindsight

MHB does not do that. No chance.

That’s not what MHB does. No chance.

What do you mean they don’t do that?

We have KfW loans, Volksbank loans, and MHB loans. We should have simply started with the MHB financing first; then the loan would have already been fully paid off.

We thought long and hard about which loan to start with, which would have made the most sense for various reasons – unfortunately, we did not consider the commitment interest, as we, as mentioned, did not expect it to be charged on the full amount.

Has the full amount not yet been drawn down at the MHB?
It says: COMMITMENT interest = for what they commit... so what has already been drawn down = you pay the agreed interest
for the undrawn part = commitment interest, once the grace period has expired.

Or is the full installment paid from 01.03.? And for the undrawn part the commitment interest? Because that is common with some banks.
For example, it is agreed that repayment begins in 12 months, regardless of whether the loan has been fully drawn down or not.

We just don’t want to talk about two different things here...

What do you mean they don’t do that?

Because that is the agreement for a better loan interest rate. The MHB loan only starts with completion. Because only then is the financing also eligible for coverage (= refinancable through cheap covered bonds), before that it is an unsecured loan and therefore expensive in refinancing.

This is how it should also have been explained to you, that the MHB is only paid out last.

Has the full amount not yet been drawn down on the MHB?
It says: COMMITMENT interest = for what they commit... so for what has already been drawn = you pay the agreed interest
for the undrawn part = commitment interest, once the free period has expired.

Customer comes to the bank and wants €200,000 for the new build.
Bank says: we work with an Immobilienbank. You will get great conditions there.
Immobilienbank says: You get even better conditions if we don’t have to handle 98 disbursements over the next 14 months.
Bank then tells the customer: We will finance the €200,000 under the same conditions as the Immobilienbank so that you, dear customer, get the better conditions.

Pre-financing of the MHB loan by the bank. Therefore, commitment interest applies to the entire MHB loan and interest on the utilization at the bank.

ahh, I understand...

Interest at the bank that pre-finances the MHB = 1st cost block
Provision interest at the MHB = because the construction interest-free period has expired...
that's why you pay twice ;)

but you are not done with the construction anyway, i.e. no matter which bank, which constellation, these costs would appear everywhere (i.e. for the interim financing you would pay the interest here, and for a loan elsewhere because it has not yet been drawn down you would pay construction period interest).
I can't understand it any other way...

so in your example:
Loan at the MHB cheap (200 TEUR) but only with a disbursement at completion.
Another bank pre-finances the 200 TEUR, therefore you pay the interest here
but the 14 months have probably expired now, and the house is still not finished, otherwise the 200 TEUR would have been drawn down completely = then you would replace the pre-financed bank loan with the MHB loan!

Because that is the agreement for a better loan interest rate. The MHB loan only upon completion. Because only then is the financing eligible for coverage stock (= refinanceable through low-interest covered bonds), before that it is an unsecured loan and therefore expensive to refinance.

You should have been explained that the MHB is only paid out last.



Pre-financing of the MHB loan by the bank. Therefore commitment interest on the entire MHB loan and interest on the utilization at the bank.

No, that is not correct. We were able to decide the order of the disbursement ourselves. Why should MHB have the right to repay the loan LAST? Where would such a clause be written down? They could not care less whether, how much, and where we still have other loans running. I am 100% sure of that. However, we were simply not informed about the commitment interest on the entire loan amount – unfortunately... As I said, poor bank advisor.

ahh, I see...

Interest at the bank that pre-finances the MHB = 1st cost block
Commitment interest at MHB = because the construction period free time has expired...
that’s why you pay twice ;)

but you are not finished with the construction anyway, i.e. no matter which bank, which constellation, these costs would appear everywhere (i.e. the interim financing interest would be paid here, and for a loan elsewhere that has not yet been drawn down you would pay construction period interest).
I cannot understand it any other way...

so in your example:
Loan at MHB cheap (200,000 EUR) but only with one disbursement upon completion.
Another bank finances the 200,000 EUR in advance, so you pay interest there
but the 14 months have now expired, and the house is still not finished, otherwise the 200,000 EUR would have been fully drawn = then you would repay the bank’s pre-financed loan with the MHB loan!

That ultimately has nothing to do with the completion of the house or similar. It’s about drawing down the loan COMPLETELY. Whether the house is finished or not is initially irrelevant.

And of course, if I pay commitment interest at another bank where the amount is only still 50,000 EUR outstanding, the amount is logically not as high as 280,000 EUR at MHB.