What are the costs of a construction deposit account?
You do not pay any extra commission fees for a construction deposit account with your mortgage. However, the monthly costs of your mortgage are affected: your total borrowing amount is increased, so your monthly payments will be higher.
Interest on the construction deposit account
You will receive an interest payment (from most lenders) on the amount that has not been withdrawn from the construction deposit account. This interest is offset with any mortgage interest you might owe.
As long as the full amount is still in the construction deposit account, you will therefore only pay the repayment sum on your mortgage, and no interest just yet on balance. As soon as money is taken from the construction deposit account, you will no longer receive any compensation for that part. Your monthly payments will then increase because the interest payment will no longer be added. Your monthly payments therefore depend on the moment that you take money out of your construction deposit account.
Keep in mind, that with annuity and linear mortgages, your repayment is due on the entire loan – including the construction deposit account – from the start, even if you are starting building work at a later stage.