When does the repayment of the loan begin?

Dear forum readers,

we are planning to purchase a plot of land / build a semi-detached house.
In advance, one question is not yet quite clear to me.

If we were still in the construction phase, does the repayment of the loan taken already begin?

I have already read here that loans are paid out in individual stages and that there may be an interest-free waiting period.

Primarily, I am concerned about the monthly burden that arises when you still have to pay the apartment rent.

Thank you in advance for your answers.

Hello Amelie,

This varies from bank to bank. Some banks offer 6 months of interest-free availability period, others 10 or even 12 months. But no bank I spoke with wanted to negotiate an extension of this period. I was able to negotiate the interest rate – but not the interest-free availability period.

However, this only applies to the part of the loan that you do not yet need – that is, the money the bank has not yet disbursed.
At the moment you buy the property, interest and repayment become due. That means if the bank disburses, for example, 50,000 euros for the purchase of the property, interest payments for these 50,000 euros begin from the day of disbursement. If at some point the first invoice from your developer comes in for, say, 30,000 euros, then from that day on you pay interest and repayment for the now 80,000 euros.

In this way, your monthly burden steadily increases during the construction phase.
Some banks (e.g., KFW) offer a repayment-free year – that means from the respective disbursements you pay only interest and no repayment yet. Whether this is worthwhile, however, must be decided individually. Clearly, this initially lowers your burden by a few euros, but of course it also extends the overall term. This doesn’t really make a difference with financing over, for example, 30 years – but with financing with, for example, a 10-year fixed interest rate, it massively increases the remaining debt after those 10 years.
As I said – everyone has to decide for themselves.

Best regards
Micha

I am almost certain that the repayment only begins once the loan is fully disbursed.

For the disbursed part, one pays the corresponding interest. For the non-disbursed part, possibly the commitment interest.

Only when the loan is fully drawn does the payment including repayment begin.

Assumptions:

- Total loan amount: 250,000€
- Effective interest rate: 3%
- Repayment: 2%
- Without commitment interest

In the calculation from "Micha&Dany" it would be: After disbursement of 50,000€ To pay the bank: 125€ interest + 83.33€ repayment = 208€ total/month

In my opinion, however: After disbursement of 50,000€ To pay the bank: 125€ interest + 0€ repayment = 125€ total/month

And then only after disbursement of the 250,000€ do interest + repayment apply.

Otherwise, I believe banks would also find it quite difficult to recalculate the interest, repayment, and outstanding balance anew after each partial disbursement.

@Emer: Very well described, this is exactly the case with us as well, both for the 2 KfW loans and for the bank loan.

Whether this is bank-specific or not, I don't know.

It is already quite comfortable for the construction phase itself ... although the interest is of course not negligible with such high loans, for example when about 75% have been drawn down as is currently the case with us. In addition, there is the commitment interest for the undrawn portion (in our case 6 months).

What I have wondered is:
What actually happens if, in theory, one does not fully utilize the loan?
So if you, for example, don't draw down a few euros and just leave them there?
A mischievous person might think ill of that

Greetings
Andi

Thank you all. Your answers give me a good insight into what to expect.

For our bank loan, the repayment began with the drawdown of the first installment payment. And indeed in full amount. So it varies from bank to bank.