Everything is becoming more expensive and interest rates are rising. These should slow down the rise in prices. However, some homeowners who have not yet paid off their property fear that they will no longer be able to afford follow-up financing due to the high interest rates. What should be done now?
In 2020, interest rates for real estate financing were below one percent. Even at the beginning of the year, they were still at one percent. When the ECB raised the key interest rate to combat inflation, interest rates for real estate financing also rose.
However, while the key interest rate stood at two percent in October, mortgage rates rose by two percent according to the Financial tip between 3.7 and 4.2 percent. For homeowners who are due for follow-up financing in the coming months and years, this means that the monthly installment will increase significantly. This is unsettling for many owners and they are wondering whether they can still afford follow-up financing now.
What can I do now?
In any case, it is advisable to find out about current interest rate developments and possible follow-up financing at an early stage. If interest rates rise, it may be advantageous to take out follow-up financing before the fixed interest rate on the current loan has expired. You should also check different offers and seek advice from an independent financing expert.
The forward loan
With a forward loan, you can secure the current interest rates for the further financing of your property up to five years before the fixed interest rate on the current loan expires. This makes sense if it is expected that interest rates will continue to rise. However, an interest premium is usually charged. You therefore need to carefully calculate whether the forward loan is worthwhile.
The prolongation
A prolongation is the extension of your existing loan. The new interest rate is based on the current market interest rates. The disadvantage is that the repayment installment increases if interest rates rise. The advantage, however, is that there are no additional costs, such as for the transfer of the land charge and the notary, or a new credit check. This is the case with debt rescheduling.
Debt rescheduling
Even if additional costs are incurred here, it can make sense to look for offers from other banks that offer more favorable conditions at an early stage. However, this is only worthwhile if better conditions, such as a lower interest rate, compensate for these additional costs.
Are you thinking about how to finance your property? Or would you like to know how the real estate market is developing? Get in touch with us! We will be happy to advise you.
Notes
For reasons of better readability, the generic masculine is used in this text. Female and other gender identities are explicitly included where this is necessary for the statement.
Legal notice: This article does not constitute tax or legal advice in individual cases. Please consult a lawyer and/or tax advisor to clarify the facts of your specific individual case.
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