A real estate loan is a very long-term loan, so that the possible fixed interest rates almost never reach the total duration of the loan repayment, unless a fixed interest rate of 30 years can be agreed. It is therefore generally the case that follow-up financing of a real estate loan is basically required at least once, usually even two to three times as part of the entire loan repayment. The borrower must take care of such follow-up financing at the latest when the previous fixed interest period has expired. The loan used up to now is very often extended, so an agreement is made about a new fixed interest rate at the current conditions. The follow-up financing for the real estate loan can also be carried out before the previous fixed interest rate has expired, but then some aspects must be considered by the borrower. http://www.durhampast.net/greece-is-resigned-to-cede-sovereignty-in-exchange-for-help-to-avoid-bankruptcy/ for further explanation
Long term loan variable interest rate
If, by the way, no fixed interest rate has been agreed but a variable interest rate, then follow-up financing is practically possible at any time without problems or costs. However, if you want to end the previous fixed interest rate prematurely and use follow-up financing from a new provider, then the previous bank as the lender must first agree to this early settlement of the real estate loan. Most banks will give this approval nowadays, but only very rarely without the calculation of a prepayment fee. Therefore, the borrower must compare the costs incurred in the form of this compensation to the interest savings that he can achieve from the better interest on the new loan.
Pay off of real estate loan
Only if this saving is greater than the cost of the prepayment does the early repayment of the previous loan and the new follow-up financing for the real estate loan pay off. Another possibility of follow-up financing is the so-called forward loan. This has the advantage that the previous fixed interest rate agreement does not have to be terminated prematurely, and therefore there are no costs in the form of the prepayment decision Damage. In the course of the forward loan, the borrower can still secure the currently low interest rates, even if the loan may actually only be paid out in a year or two.
Nevertheless, these advantages are not entirely free under the forward loan, but an interest premium is payable. For example, if the “ normal ” mortgage interest rates are 4.00 percent when concluding the forward loan as follow-up financing, the customer and borrower must pay an interest surcharge of 0.40 percent, for example, so that the effective interest rate is then 4.40 percent would recommend. In general, this type of follow-up financing always makes sense if it is foreseeable that the interest will rise in the period up to the due date of the previously used loan.