Follow-up financing - planning for the future
The road to the home is long and usually always associated with high costs. Until Germany's real estate owners have paid off their home, an average of 30 years elapse. However, most of the loans only run for ten years with the respective fixed interest rate - followed by follow-up financing. No money should be given away with follow-up financing. Often, it pays off to switch to a new provider.
The fixed-interest period for annuity loans
The annuity loan is one of the mortgages most frequently granted in Germany for mortgage lending. The first feature of this product is the fixed interest rate for a fixed period of time. Depending on the bank, this time is five to 15 years. The monthly or quarterly annuity rate remains constant during this time. The advantage: the borrower has absolute planning certainty for his budget. However, the loan can not be terminated during the fixed interest period.
At the end of the first ten years, the borrower may terminate six months in advance. Anyone who chooses to repay the loan within the fixed interest period pays a prepayment penalty to replace the bank's loss. The amount of compensation depends on the size of the loan, the current level of interest and the agreed interest rate.
What to look for when financing
The interest rate is of course one of the most important features of a loan Financing. However, it should not be the only criterion when deciding on follow-up financing. Each borrower should consider which special arrangements should be made with the bank. The possibility of a special repayment should necessarily be included. If this is agreed, a desired loan amount can be repaid per year without notice. The monthly rate is not reduced by a special repayment. The annuity rate, however, includes the repayment and interest. The higher repayment reduces the amount of interest payable, increasing the monthly repayment.
The amount of repayment is also an important aspect for follow-up financing. Many borrowers initially agree on a repayment of one to two percent. Repayment may often be changed once or twice during the repayment term . In case of financial difficulties, the credit can be adjusted downwards or with financial carelessness upwards.
Why switch providers?
Anyone who lets out the interest rate fixation and does not inform themselves about the offers of the competition could regret that later. At Loan start , many real estate owners compare all offers, with the follow-up financing they are ten years later a bit lazier. The consequence: consumer advocates increasingly have to watch as many banks literally pull their long-standing, loyal customers over the table in the follow-up contracts .
When do the follow-up financing work?
Experts agree: Interested parties should look around at least six months before the end of the repayment term . But even for customers whose loans expire at the turn of the year, it is not too late. You have to hurry, though. It usually takes a few days for the documents to be put together by the borrower. An additional two weeks elapse before the loan application is examined by the financing bank.
The Alternative: Forward Credit
With a forward loan, paying off is now easier: Owners whose financing expires in a few years can afford the Save current conditions for an upcoming follow-up financing. Currently, this can take up to five years in advance. The principle is relatively simple: The customer signs the loan agreement today, but does not ask for the money until a few years later. For each month waiting period, an interest charge is required by the lender. This is usually 0.01 to 0.04 percent per month. The current premiums are favorable, as capital market experts do not expect interest rates to rise sharply in the foreseeable future.
Example : In the next few weeks, a housing loaner will have a follow-up loan loan. For the chosen bank, an effective interest rate of 2.50 percent can be expected. If mortgage lending is only triggered in 24 months, a forward loan could be more appropriate. Instead of 2.50 percent, the supply would be 2.90 percent. If the investor believes interest rates will rise more than 0.4 percent over the next two years, then the forward loan is the right choice. Ideally, it will wait a bit longer, so the lead time will be shorter and the premium lower.
Caution : There is no guarantee that the interest rate market will develop according to the wishes of the homeowner. Many real estate owners are currently opting for the forward loan because they have signed loans at much higher interest rates several years ago.
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