Construction finance & overnight money

The dream of owning a home often turns into a nightmare when the construction company, interior designer and plumbing company ask for cash. Young couples and families, in particular, tend to underestimate the costs involved in building such a house and face bankruptcy even before the building has been completed. However, such scenarios can easily be avoided with a little preparatory work.

A building financing tailored to your own circumstances reliably secures the building project and the client’s finances. Anyone who needs mortgage lending usually has too little equity to be able to offer a bank sufficient security for a loan. That is why people traditionally fall back on the property to be financed as security and cover it with a corresponding mortgage. Basically, this means that the bank is entered in the land register as the owner of the building and can then sell it accordingly if it becomes clear that the builders can no longer repay the loan.

Such a mortgage means a very high level of security for the banks so that there is increasing competition between the credit institutions. As a result of this pressure, the building interest sinks into the abyss, which of course benefits the building owners.

In order to find cheap mortgage lending, it is definitely worth getting several offers from many different banks. As a
builder, you can also confront your own house bank with cheaper offers from the competition and thus possibly negotiate an even lower interest rate. Call money is invested in special call money accounts. These accounts differ from a conventional current account in that no transfers or other transactions to third-party accounts are possible.
Nevertheless, the owner can freely dispose of the daily money available every day. This fact is particularly negative for the bank, as the institute has to reckon on a daily basis that the customer will withdraw his capital and that it can
no longer be used for the bank’s business. Therefore, theoretically, only very little interest is paid on overnight money.

In addition, the interest rate is only set for one year at a time, after which time there may be an unfavorable
interest rate trend for the investor.

Theoretically, the institute could also change the interest rate on a daily basis, since the capital can, under certain circumstances, be invested for just one day.

However, due to the growing competition between individual credit institutions, these facts have shifted enormously. The banks try to attract new customers with high-interest rates on overnight money so that today you
usually get higher interest rates on a call money account than on a savings book.