Construction period interest

If you buy a property still under construction, you usually don't pay the purchase price in one lump sum. That means the loan amount you've secured for your real estate financing is paid out in installments — depending on the construction progress. Interest is then due directly on the amounts disbursed. You will have to pay commitment interest for the amount not yet spent after a certain time. Loan interest and commitment interest combined are referred to as construction period interest. It is all the interest you have to pay during the construction phase — the construction period.

To keep the construction period interest as low as possible, it's best to agree on a period free of commitment interest corresponding to the planned construction period.