Interest Real Estate Financing | Real Estate Finance Real Estate Financing

June 29, 2019 by No Comments

Loan Amount: Many banks provide real estate financing at peak interest rates only for certain minimum or maximum amounts. Not cheap, but often very helpful – fixed-term deposits abroad, fixed-term deposits in Germany? The interest rates for real estate financing are also moving in the same direction. At low base rates, this also applies to the construction interest. 

Real estate financing – now expect low interest rates

Real estate financing - now expect low interest rates

Anyone signing a loan agreement or follow-up financing for their property in the current low-interest phase is in a happy and enjoyable time. Because the interest rates with two decimal places and ten-year interest on mortgage loans are extraordinary and certainly will not always remain at this level. How they can use this extremely favorable interest rate structure in the coming years, is considered by many, for example, if the current commitment period expires in the next few years and no one can foresee the then valid offer.

The difference arises exclusively from the time of conclusion of the contract; the payment or extension of the commitment period happens at a later date. In this case, it is not possible to pay or extend the commit time. Although the current commitment period of an already existing loan agreement has not yet expired, the borrower is already in agreement with his principal bank about follow-up financing at a later date. For most banks, the interest conditions are “reserved” up to three years before the old loan expires, some of them even five years.

Until the new follow-up financing is granted, the credit institutions set a monthly fixed rate premium, currently between 0.02 and 0.04 percentage points. This premium is multiplied by the number of months remaining until the end of the original interest period.  The borrower wants to take advantage of today’s low interest rates and agree a term loan in the summer of 2013, with the remaining liability at the end of 2014 to be repaid.

The forward surcharge with a monthly rate

The forward surcharge with a monthly rate

It has a monthly rate of 0.03 percentage points amounts to 0.51 per cent for the remaining 17 calendar months. Basically, the conclusion of such a form of financing is a “bet” on rising interest rates while securing the current level of interest rates. If, on the other hand, interest rates have stayed the same or have fallen short of expectations, you are bound by the contract and still have to accept the expensive lending business.

Should mortgage credit expire in the coming years and follow-up financing be required, it would be advisable to ask the bank to calculate the structure of a term loan without obligation. In this case, it makes sense to contact the bank.

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