Paying off a bank loan for your own home can often take around 30 years. After ten years, the fixed interest period comes to an end. Owners then have to look into follow-up financing. They have to decide whether they want to remain loyal to their bank or whether they want to reschedule the mortgage loan with another bank. We tell you when rescheduling and changing lenders can make sense.
There are basically two options when the fixed interest rate has expired after ten years. On the one hand, the borrower can choose to stay with his old bank and extend his existing loan agreement. This process is known as a rollover. On the other hand, however, the borrower can also decide to use the follow-up financing for a loan rescheduling. In this case, the borrower replaces the existing loan with a new loan that offers better terms. Predominantly, the borrower also switches to another bank when rescheduling the loan. Nevertheless, the loan can also be rescheduled at the borrower's own bank.
When rescheduling debt, you should pay very close attention to the deadlines. If you have found out when the current fixed-interest period ends, the written notice of termination must reach your bank no later than three months before the fixed-interest period expires. If you have chosen a new bank, you must of course inform it of the exact date of the change and conclude a new contract with it. The remaining debt of the old loan will then be automatically paid off by the amount of the new construction financing.
If you want to cancel the existing loan with your current bank before the end of the fixed interest rate period in order to switch to another bank, a kind of penalty fee will be charged. This is because the old bank loses income as a result. The fee is called an early repayment penalty. In most cases, it is not worthwhile to reschedule early because of the amount of the penalty fee.
However, if you are thinking of rescheduling your debt after the fixed interest rate period has expired, you can reap great benefits. You have the chance to negotiate better conditions and save money through lower interest rates. In any case, however, you should inform yourself well about all offers in advance and ideally seek advice from an expert. If you show your old bank that you are well informed about all the offers, they may make them their own attractive offer for debt restructuring. In addition to commercial advisors, debt counseling centers can also help. In general, it can be assumed that the higher the residual debt, the more likely it is that debt restructuring will pay off.
Finally, even a timely debt restructuring by switching to another bank always involves costs. If the debt is rescheduled, the entry for the land charge must also be changed. A so-called land charge assignment takes place. This results in notary costs, since only the notary can initiate this legal transaction. These notary fees amount to approximately 0.17 percent of the remaining debt. As a rule, your new bank will take the necessary formal steps.
Want to learn more about whether debt restructuring makes sense for your property? Contact us! We will be happy to advise you.
Legal Notice: This article does not constitute tax or legal advice in individual cases. Please have the facts of your specific individual case clarified by a lawyer and/or tax advisor.
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