> when you borrow $500,000 from the bank, the bank’s funds don’t go down by $500,000
While technically true, this is a bit misleading, because if you actually /do/ anything with the $500,000, that does in fact cause the bank's funds (i.e. reserves) to go down.
If you withdraw it in cash, then the bank will have to give you some of the Federal Reserve Notes it has in its vault, and when they request more from the Federal Reserve, their account there will be debited $500,000.
Or if you send it to someone at a different bank, then to settle the transaction your bank's balance at the Federal Reserve (or another intermediary bank) will go down by $500,000, and the other bank's will go up. This tends to average out if both banks are receiving deposits and making loans at equal rates, but if they become imbalanced the bank is at risk of its reserves falling below the requirements, which it must remedy or risk bankruptcy.
You're right that low interest rates make it easier for banks to create money, though, because one option a bank has to remedy low reserves is to borrow them from another bank at an interest rate that the Federal Reserve can influence.