When you are on a home loan, you usually receive the full amount at one time. But in some cases the release of funds is done in stages, it is the intermediate interests.
There are two possibilities when a bank gives you money for your home loan. The first option that is most common is to receive on your account the amount of your real estate financing in one and only payment , therefore the repayment of the capital starts.
The second possibility, unusual, but still exists: the release of funds in several times. In the case of works, construction or purchase off-plan the bank may grant you a release of funds in several installments. This second possibility generates new costs (apart from notary fees and other ancillary costs): this is called interim interest.
What does intercalary interest mean?
A home loan involves in most cases a single payment after the signing of the deed of sale. It is the bank which acts the amount of the money necessary for the purchase of housing by the borrower, until the signature at the notary is made, the latter is in possession of the sum.
Once the money is obtained and the housing acquired as a result of a loan offer, repayment of the loan through monthly payments is done the following month. Monthly payments paid take into account the capital to be repaid, including interest.
Interim interest is of a different nature. Indeed, this type of loan interest is special because it applies to a home loan that is paid in several times by the bank. This case applies when buying a property off-plan: Sale in the Future State of Completion, when building a property or carrying out renovation work with the help of a credit.
This mode of financing comes to unlock sums in a progressive way according to a programmed deadline for the total payment of the funds of financing following a request of loan. If you build your house or buy off-plan housing, the release of funds will be done in phases during the completion of the work, so it is important to start repaying the loan only when you have entered your home. housing.
How to calculate interim interest?
Suppose you want to buy a house that needs to be renovated from top to bottom, we can imagine that the mortgage will be 300 000 €, including 250 000 € for the acquisition of real estate and 50 000 € of work.
It is then possible to obtain 250 000 € to get your property, and ask for the rest of the loan amount two months later. The repayment of the loan will begin then two months later, but this is where the interim interest to be repaid in the meantime.
Interim interest is calculated on the basis of a two-month mortgage rate in our case for the sum obtained at the beginning. If the real estate rate is 3%, you will have to pay 250 000 € x 3% (loan rate) = 7500 €, then (7500/12) x 2 = 1250 €, this sum will add up to the total amount of the real estate loan. . Interim interest will have ended when the funds of the real estate loan are fully obtained by the borrower.
Example of an amortization table for property at € 244,999 for a person with annual income of € 25,000 and a contribution of € 5,000 for a loan over 20 years at a rate of 1.15%
We invite you to do your credit simulation on our site to calculate your interest and get the best rate:
How do interim interests work?
Interest on a home loan is paid to the bank during the first years of repayment of the loan . That is to say that when you borrow money to buy your property, you repay in one place the interest of the remaining capital, and then the remaining capital loaned.
Interim interest does not work so you can start paying back your capital when the funds to finance your real estate project have been fully secured.
That is to say that you will get all the funds when the construction of your property is finished and / or when the renovation work has been done and you can move into the dwelling that is now yours.
You pay only the interest of the mortgage during the period of the first bank payment to the total release of the funds. Interim interest works in this way, it is the cost of releasing a mortgage in several phases.
How to reduce the cost of interim interest?
Reducing the total cost of interim interest can be done in many ways . For example, you can use your personal contribution. This will allow you to reduce the amount of the first release of funds.
It is also possible to move the first payment if your personal contribution is considerable. The construction of your home can accelerate so that the repayment period during the first and last release takes less time for you to pay less deadlines.
It is also possible to negotiate with the bank where you take your home loan, it can reduce the amount of interim interest by dividing the loan into several credits so that it is less important.
Making your mortgage cheaper can also be done by renegotiating your credit with another bank to have lower interest for several loans.
Remember to study your borrowing capacity and calculate your debt ratio with your banker or through a broker, this period of reflection will allow you to not create a default.