Build or renovate and credit.
Anyone who builds or renovates and studies the lender’s proposal sometimes wonders if it all makes sense. Especially if it’s your first project. What is a booking fee for example? And is that not an extra cost from which you can better try to overcome?
After you have compared the different repayment tables of the different financial service providers, you sometimes bump into different conditions. For example, some banks charge a reserve fee on the undrawn capital after the first 6 months.
What is a reservation fee?
A reservation fee is an extra cost that some banks charge to keep money (longer) for you. Usually you do not need the total loan amount in one go, and you receive the necessary money in installments as you have sent the bank invoices for the work performed. More than once, the bank charges you interest of around 0.1% after six months: a cost to keep the rest of the loan amount aside.
Even when your renovation or renovation work is delayed – and you cannot send the bank an invoice on time – such costs are sometimes charged. This is because the bank must keep your money for longer than anticipated. Often you can negotiate about this.
Yes and no. To begin with, it is of course always better not to have to pay a reservation fee. But this does not mean that you will necessarily end up more expensive at the end of the ride.
An example from practice.
If you immediately start paying back on your first withdrawal (this is referred to as the “first release system”), you repay capital plus interest on the withdrawn portion. The other part has no reservation fee for six months. After those six months you pay 0.1% on the capital that has not yet been withdrawn. But if you were already repaying this, for example, you would have paid 0.2xx% on it. And so here comes the advantage.
At the end of the home loan (after 20 years, for example) you would have repaid less interest than if you had immediately withdrawn the full amount and had exactly started paying the repayment table with the fixed monthly amounts. The total payment period remains the same in this case. In other words, a reservation fee of 0.1% is not a disadvantage compared to immediately taking everything in and paying it off.
Compare not only the interest but also the conditions!
That is why it is important to properly inform yourself at a bank or other lender. How will the repayments work?
When do you pay off capital? Once you have recorded everything? Or from the moment that you start to withdraw capital. With the additional question: when does your loan period start? As soon as you start to draw capital? Or only from when you have taken up the entire capital? And what do your repayments look like? As simulated in the repayment table? Or taking into account the gradual withdrawal of capital?
Simulate the cheapest renovation loan here!