Compensation for non-acceptance

Non-drawdown penalty - A non-drawdown penalty is a claim for damages that the bank has against the borrower if the borrower fails to draw down a contractually agreed loan, or draws down only part of it. It arises when the bank has already refinanced the loan funds and suffers interest losses as a result of the non-drawdown. The non-drawdown penalty is the counterpart to the prepayment penalty-in the latter case, the loan is repaid early; in this case, it is not drawn down at all.

Calculation and Amount

The calculation follows the same principle as the prepayment penalty: The bank determines the loss due to interest rate deterioration-the difference between the agreed-upon loan interest rate and the current market interest rate for the remaining term, discounted to present value. Added to this is a reimbursement for administrative costs. The risk costs and administrative costs saved are deducted. For a loan of 300,000 euros with a 10-year fixed-rate period, the non-drawdown penalty can amount to 5,000 to 30,000 euros, depending on the interest rate difference.

The exact calculation method is not conclusively regulated by law, but is based on the Federal Court of Justice (BGH) rulings on prepayment penalties. Banks use either the asset-to-asset method (comparison with the current market interest rate for similar loans) or the asset-to-liability method (comparison with yields on mortgage-backed bonds). Borrowers have the right to review the bank’s calculation-in case of doubt, it is worth consulting an independent financial advisor.

Typical Triggers

The most common reasons for non-acceptance are: cancellation of the purchase agreement (withdrawal, financing condition not met), switching to a cheaper bank after the contract is signed, failure of the construction project (building permit denied, developer’s bankruptcy), or personal reasons (divorce, job loss). In many cases, compensation for non-approval can be avoided or reduced by acting promptly.

The situation is particularly tricky when the purchase agreement is subject to a financing contingency, but the loan agreement does not contain a corresponding exit clause. If the purchase fails due to the financing contingency, the buyer is released from the purchase agreement-but the loan agreement remains in effect, and the bank can demand a non-acceptance penalty if the loan is not drawn down.

Distinction from the commitment fee

In addition to the non-acceptance penalty, the commitment fee should not be confused with it: This fee applies if the loan has been agreed upon but has not yet been drawn down within a certain period (usually 6 months). The commitment fee is a type of interest substitute for holding the loan funds and typically amounts to 0.25% per month on the amount not yet drawn down. It applies even if the loan is later drawn down in full.

Practical Tip for Buyers in Nuremberg

We recommend that buyers in the Nuremberg metropolitan area not sign the loan agreement until the purchase agreement is finalized-ideally only after notarization or at least after the draft purchase agreement is available. If the purchase agreement contains a financing contingency, the loan agreement should include a corresponding exit clause.

If you are considering switching financing: Check the notice periods and non-acceptance conditions of your existing loan agreement before signing with a new bank. Especially in Nuremberg, where purchase negotiations can quickly escalate due to the tight market, buyers sometimes feel pressured to sign loan agreements too early.

Frequently Asked Questions

Can I avoid the non-acceptance penalty?

Yes, in certain cases: If the loan agreement provides for a right of withdrawal and the withdrawal period is still ongoing (14 days after the agreement is concluded). If the agreement contains a suspensive condition (e.g., the conclusion of the purchase agreement) that has not been fulfilled. Or if the bank made an administrative error in the cancellation policy-in which case the contract may still be canceled at a later date. In any case, it is advisable to have the matter reviewed by a specialist attorney for banking and capital markets law.

Is the penalty for non-acceptance tax-deductible?

For rental properties, the non-drawdown penalty may be deductible as income-related expenses if it is related to the financing of an investment. For owner-occupied residential property, it is not deductible. The tax treatment depends on the individual case-tax advice is recommended.

What is the difference from the prepayment penalty?

The non-drawdown penalty applies when the loan is not drawn down at all. The prepayment penalty applies when a loan that has already been disbursed is repaid early (e.g., upon sale of the property). Both are calculated according to similar principles, but they apply to different situations and occur at different points in the loan relationship.

Room for negotiation with the bank

Many borrowers are unaware that the non-drawdown penalty is negotiable in certain cases. Banks have a genuine interest in reaching an amicable agreement because a lengthy legal dispute also entails costs for them. Possible approaches:

• Name a replacement borrower: If a third party takes over the loan under the same terms, the bank suffers no loss. In practice, this rarely works because the bank must approve the creditworthiness requirements.
• Alternative financing through the same bank: If the same financial institution is to finance another project of the borrower, the refusal to accept the loan may, under certain circumstances, be offset against a new contract.
• Goodwill solutions: Some banks show flexibility, particularly with customers who have a long-standing business relationship-it is worth seeking a discussion.
• Expert review of the calculation: The bank’s calculation method is not always correct. A financial expert can review the calculation and, if necessary, identify errors that could lead to a reduction.

Legal disputes and Federal Court of Justice (BGH) case law

The precise calculation of the non-acceptance compensation has repeatedly been the subject of legal disputes. The Federal Court of Justice (BGH) has established standards in several rulings on prepayment penalties that apply mutatis mutandis to compensation for non-acceptance as well. According to these standards, the bank must disclose the calculation in a transparent and comprehensible manner. A flat-rate or non-transparent calculation can be challenged.

Important: Banks may only demand compensation for the actual loss-i.e., no additional processing fees or margins that are not based on the actual interest rate differential. Anyone who suspects that the calculation is incorrect should consult a specialist attorney for banking and capital markets law or a specialized consumer protection organization.

Risk Management When Buying Real Estate

Non-acceptance compensation is a risk that can largely be avoided through careful planning. The following measures have proven effective in practice:

1. Timing Coordination: Sign the loan agreement only after the notarized purchase agreement, if possible.
2. Clear Conditions: Link the loan agreement to the conclusion of the purchase agreement (suspensive condition).
3. Extended commitment period: For new construction or construction projects with long lead times, negotiate a generous grace period.
4. Review the cancellation policy: If the cancellation policy is incorrect, the right of cancellation is extended-in some cases up to one year and 14 days after the contract is signed.
5. Market monitoring: Those who keep a close eye on real estate prices and financing terms make better decisions about the right time to sign a contract.

In the Nuremberg metropolitan area, where purchase decisions are often made under time pressure and properties are sometimes sold within a few days, buyers are particularly prone to signing loan agreements too early. Obtaining a financing commitment early on makes sense-but the formal signing of the loan agreement should ideally take place only after the notarization.

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