Reducing borrowing costs

Even if at first glance it is only a few euros that can be saved, it quickly adds up to several hundred a year. The talk is of real estate loans. Those who are about to reach the end of their fixed-interest period have a good chance of obtaining cheaper money. Luckx – das magazin describes how it works.

Who today has an old real estate loan, often looks at the current low interest rates. But: In many cases, rescheduling is quite simple. The easiest time to reschedule is when the fixed interest rate on the old loan expires. Their duration is specified in the loan agreement. Those who have only five years or less remaining term can already secure favorable interest rates for the follow-up loan today. For this purpose, banks offer so-called forward loans. The shorter the time to the redemption date, the better the conditions.

Take advantage of special cancellation rights

What many consumers don't know: Anyone who has taken out a loan with a fixed interest rate of more than 10 years generally has a special right of termination, namely "after the expiry of 10 years after full receipt, subject to a notice period of six months". This is what § 489 of the German Civil Code (BGB) provides for. So at this point, it's very easy to get out of a current loan agreement and move the money around.

A new loan is attractive not only because general mortgage rates are currently low. The remaining loan amount is also lower and most properties have increased in value in recent years. This reduces the loan-to-value ratio for banks and allows them to grant the loan on better terms.

Example calculation

Who, for example, 10 years ago a loan of 200.000 euros with 20-year fixed interest rate at an interest rate of 3.5 percent borrowed, must at a redemption of 3 percent per year until 2030 still about 29.000 Euro interest to pay. The monthly rate would be approximately 1.100 euros.

If this loan is rescheduled today, this would result in a residual debt of 128.000 euros, a loan-to-value ratio of less than 60 percent, an interest rate of 0.52 percent and a further 15 years of fixed interest rates would result in a saving of around 24.000 euros. The loan would then be completely repaid at almost the same rate.

Partial terminations are also possible by invoking the special right of termination under the German Civil Code – for example, if only a residual amount still needs to be financed because the borrower has made an inheritance in the meantime.

Debt restructuring – made easy

Rescheduling can be done with little effort and at a low cost. "There is usually no need for a notary appointment. The banks involved are sorting it out among themselves and taking turns with each other," Sandra Eichberg knows. She is a financing consultant at Baufi24. "No early termination penalty is due if you invoke the special termination right and meet the statutory deadlines. Borrowers only have to pay the cost of the assignment of the land charge. This depends on the amount of the registered land charge. Usually this is a low three-digit amount."

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