What is a construction deposit?
A construction deposit is part of a mortgage that is deposited in an escrow account by the lender. This amount is not paid to the notary upon delivery. The amount in the escrow account is reserved for planned construction/renovations.
When is a construction deposit required?
If construction activities are reported during the mortgage quotation request, a construction deposit is often automatically created. If the appraiser has taken into account construction to determine the market value, a construction deposit is required. The lender will then know for sure that construction activities will take place. It is important that the construction costs in the mortgage request match those in the appraisal report. We therefore recommend using the same form for both appraisal and mortgage requests.
Does a construction deposit involve costs?
Usually you receive the same interest on your deposit as the one you pay for your mortgage. However, some banks reimburse 1% less on your construction deposit, which means the costs are 1%.
In addition to any interest obligation, there is always a full redemption requirement for annuity and/or linear mortgages.
What happens if there is still money in the deposit?
This may be use as an additional penalty-free redemption (this additional amortization is not deducted from the usual 10%, 15%, or 20% penalty-free redemption)
Is the interest I receive automatically settled?
Most banks will do this.
Some lenders such as Florius, ABN AMRO, and ASR do not settle the interest. Instead, the interest you receive on your construction deposit will be added to the construction deposit. From the start, you will pay interest on the entire loan, including construction deposit. On request it is possible to have the received interest be paid to your own account.
How can I take money from the deposit?
By filling out a form of the lender. Some lenders use an app. You may choose whether the amount will be directly deposited to your own account or the account of the contractor/supplier.
What about my monthly costs?
As long as the full amount is still in the construction deposit, you will only pay the redemption (in case the interest rate for construction deposit and loan are the same). As soon as you take money from the construction deposit you will no longer receive compensation over that part, which means the monthly costs will increase. Your monthly costs are dependent on the moment you take money from your construction deposit. Do you want us to make a calculation of these temporary additional costs? Please feel free to contact us.
Information per lender
|ABN AMRO||Lloyds Bank (Bank of Scotland)||ING|
If any of the above links do not work, please contact us.
The above information is general information. Always read the quote/conditions from your lender. Your personal situation may differ.