Construction money has never been so cheap: Real estate loans with a ten-year term currently cost between 0.8 and 0.9 percent, according to statistics from the loan broker Interhyp. In 2010, homebuyers still had to shell out four percent on average for their loans. Owners who have completed their financing on the old terms should look at the current interest rates with frustration – and wish to redeem their existing loan and exchange it for a cheaper loan.
In most cases, the loan agreement stipulates a fixed interest rate of ten years or longer. For convenience, many people wait for this period to expire before thinking about debt restructuring. This leaves them with cash, experts say.
An example: If you took out a loan of 200,000 euros at an interest rate of 3.5 percent ten years ago and continued financing the remaining debt at an interest rate of 0.8 percent, you will save a total of around 20,000 euros over the next ten years. “Compared to the previous loan, customers currently often only pay a quarter or a fifth of the interest costs for follow-up financing,” explains Mirjam Mohr, who is a member of the board of directors of the mortgage broker Interhyp and looks after the private customer business. Even small interest rate differentials result in a proud sum over the years. With a difference of 0.02 percentage points compared to the expensive old loan, owners can save around a thousand euros if the loan runs for another ten years after the debt rescheduling.
After ten years of special termination right for house loans
Credit institutions generally have little interest in rescheduling. The reason for this is the lower interest rate level: if the bank issues the repaid money again as a home loan, it must do so at a lower interest rate. The bank therefore earns less than if the customer finances the entire loan at the old interest rate. Anyone who repays their loan before the fixed interest period expires must therefore pay a so-called early repayment penalty. Exception: If borrowers took out the loan more than ten years ago, they have a special right of termination. You can then cancel your loan free of charge with a period of six months.
Whether rescheduling is also worthwhile for loans that buyers took out less than ten years ago depends on the amount of the prepayment penalty. Since 2010, this must not amount to more than one percent of the loan amount. Before it was five percent. In practice, many bank customers still pay extra, a study by the Bremen Consumer Center shows. Consumer advocates have examined 733 cases from 2017 to 2019 and analyzed how much money banks have billed to their customers for early loan repayment. Result: On average, the providers claimed just over ten percent of the outstanding outstanding debt as prepayment penalty.
The market watchers criticize the fact that many institutions do not adhere to all the requirements of the Federal Court of Justice when calculating the prepayment penalty. According to a ruling from 2016, banks must take into account contractual special repayment rights in favor of the borrower – after all, the borrower could have paid off the loan via the special repayment without a penalty. In practice, however, the banks do not take it very seriously. “In at least eight percent of the cases examined, the contractual special repayment rights were not taken into account or the current repayment was set too low,” says Philipp Rehberg, an expert in real estate finance at the Bremen Consumer Center. In view of the clear jurisprudence, this is not understandable.
With annuity loans, owners save the most if they do not change the monthly installments after rescheduling. In the classic among construction loans, the monthly installment is made up in equal parts of an interest and a repayment part. If the loan rate remains unchanged with lower interest rates, the loan can be paid off much more quickly with a debt rescheduling.