Follow-up financing for real estate loans - 10 years of savings


Anyone looking for follow-up financing for their property in 2021 will benefit from the low interest rates. The phase of low interest rates should be used for this Repay real estate loan with a higher repayment. In the long run is a Loan a burden and it is therefore better the pay off the remaining debt quickly. It is therefore cheaper the low interest rate to use to pay off the remaining debt faster with the follow-up financing. In our example, we show you how to use a early follow-up financing in combination with higher repayment You can save 10 years on the loan term.

How it works

Anyone who signs a loan agreement for a property in 2023 will benefit from the still historically low interest rate. The interest rate agreed with the bank is fixed at the beginning of the loan agreement. The interest rate then applies until the end of the fixed interest period. Common fixed-interest periods are 10, 15, 20 or even 30 years.

If the fixed interest rate expires before the loan amount has been repaid, a residual debt remains. The remaining debt must be paid or through a follow-up loan financed. If the original financing was completed five or ten years ago or even further back, you can now benefit from much more favorable credit conditions when rescheduling the loan. This constellation allows you to increase the repayment without changing the rate.

Repay real estate loan quickly thanks to low interest rates

The low interest rate is an important point in real estate financing. Those who put the interest saved into higher repayments benefit from much faster repayment. Whereas 10 years ago interest rates of 4 % and more were common, in 2021 borrowers with good credit ratings were getting construction financing at interest rates of less than 1 %. At that time, follow-up financing was a good opportunity to take advantage of the low interest rate and quickly pay off the remaining debt in follow-up financing.

By rescheduling your construction financing to a more favorable loan kinks the remaining debt downward.

If you bought a house 10 years ago and bought it with 4 % interest and 1 % principal, the actual financing would take just over 40 years. If you convert the contract after 10 years to cheap financing free of charge, the remaining term is reduced to just 19 years and 4 months. The remaining debt of €262,156.32 is repaid with 4.7 % without the original rate of €1250 per month changing. By rescheduling your construction financing to a cheaper loan, the remaining debt bends downwards.

By rescheduling your construction financing to a cheaper loan, the remaining debt bends downwards.
By rescheduling your construction financing to a cheaper loan, the remaining debt bends downwards.

Real estate loan can be terminated free of charge after ten years

A real estate loan can be terminated free of charge after ten years. The special right of termination according to § 489 BGB obliges the banks to allow a free termination after 10 years. The notice period is six months.

The ten years are calculated according to the date of payout. Thus, if the loan agreement was concluded in January, but the loan was not disbursed until March, the 10-year period begins in March.

The higher the remaining debt, the more worthwhile it is to refinance. In the calculation example above, a loan term of around 10 years could be saved for a house costing EUR 300,000. It is therefore important to pay attention to favorable conditions for follow-up financing. Because that saves a lot of money. Construction financing comparisons show that there are big differences between the banks. So you can get a ten-year loan for as little as 0.5 percent interest. Other banks can also charge 1 to 1.5 percent interest for the same loan.

Self-initiative is required for follow-up financing

As a customer, you shouldn't wait for the bank to make you a new offer. It is more effective to obtain comparable offers about six months before the end of the fixed interest period. This puts you in a better position when it comes to follow-up financing via your own bank! In order to get really good conditions for follow-up financing, you need to take the initiative.

But not only a favorable interest rate is important for follow-up financing. Many homeowners pay attention to higher and flexible repayment options when rescheduling the loan.

Set up repayment flexibly

The higher the repayment rate, the faster the loan is paid off. It is advisable 3 percent or more in amortization rate to agree. Besides, you should special repayments arrange. Then the Christmas bonus, an inheritance, can be used to make one-off payments. You should keep this special repayment open, because it accelerates the repayment. Of course, there is no obligation to make a special repayment.

But the reverse case is equally important. If you suddenly have falling income due to job loss or short-time work, an adjustable repayment rate provides security. The birth of a child can also put home financing on shaky ground, which is why a variable repayment rate is important.

Lead through on credit agreements Repayment rate change flexible. With this you can Change repayment during the term.

What is a forward loan and when is it worth it

A forward loan is a hedge against rising interest rates. If you only need a follow-up loan later, you can secure the currently favorable interest rate level with a forward loan. The loan can be taken out up to five years in the future. An interest surcharge is due for this.

Forwardloan is worthwhile himself if the interest until the redemption of the old loan rise faster than the interest premium of the forward loan.

Follow-up financing from another bank can be worthwhile

The advantage of the current bank is that it knows you and in the case of real estate a registered land charge has. Therefore, follow-up financing with the previous bank is usually unproblematic. Changing the bank for follow-up financing, on the other hand, involves some effort. After all, the new bank has to do two things:

  1. Reassess your creditworthiness
  2. Register the mortgage

The latter can only be done through a notary and is associated with costs. It can still be worthwhile, since the interest rates in our Construction financing comparison are very different for the individual banks.

10 tips for your follow-up financing

If the fixed interest rate of your construction financing expires, follow-up financing is usually necessary. With follow-up financing, you have the option of renegotiating the contract. This affects the interest conditions, but also, for example, special repayments and their amount or variable repayment rates.

To ensure that everything runs smoothly, I have put together a few tips for you.

Negotiate terms of follow-up financing

Don't wait for the bank to make you an offer. It is more effective to obtain comparable offers from other banks about six months before the fixed interest rate expires. You can do this Mortgage Calculator use from the internet. This puts you in a better position when it comes to follow-up financing through your own bank. You can use this position to negotiate things like free special repayments or better interest rates with the bank.

Show initiative when it comes to follow-up financing

When it comes to follow-up financing, you should take the first step. Start by getting comparable offers about 6 months before the end of the fixed interest period. Submit these offers to your bank as well. On the other hand, if you wait for the bank, it is usually too late to take care of other offers.
In any case, you should not only have the offer of the current bank in hand. Because through a Rescheduling to a cheap online bank can usually save money. It is therefore important to show initiative when it comes to follow-up financing and to take the first step.

Secure low interest rates for follow-up financing

The current interest rates are lower than ever. Therefore, the follow-up financing will be much cheaper than the first one. If it is still a long time before your follow-up financing, you can secure the favorable interest rates with a forward loan up to 5.5 years in advance.

Agree on special repayments for follow-up financing

With special repayments, you can use the Christmas bonus or an inheritance to make one-off payments. You should keep this special repayment open, because it accelerates the repayment. Of course, there is no obligation to make a special repayment.

Save equity

If you have saved up enough equity, you can use it for follow-up financing to reduce the remaining debt and interest burden. The follow-up loan becomes cheaper the more equity is available or the lower the mortgage on the property.

Use the low interest rate for a higher repayment for follow-up financing

Due to the lower interest rates on the one hand and the lower remaining debt on the other, you can increase your repayment significantly. The monthly rate does not change. In our example above, could follow-up financing with 4.7 percent repaid be, while with the initial financing only with 1 percent was redeemed. With this trick, the loan could be repaid 10 years faster. And with the same monthly rate!

Readjust the monthly rate for follow-up financing

If your financial leeway has changed since the initial financing, you should readjust your monthly rate. If you can afford a higher installment for follow-up financing, this will speed up the repayment of the loan.

Adjust fixed interest rates for follow-up financing

The follow-up financing is a new contract. The fixed interest rate can be redefined accordingly. With the low interest rates, it may make sense that you secure them with a long fixed interest rate. However, interest rates can be even lower later on. However, speculating on this is hardly worthwhile given the low level of interest rates.

Get cheap follow-up financing thanks to the special termination option

If your construction financing has already been running for ten years, you can terminate the contract and reschedule the debt. Because with the special right of termination according to § 489 BGB, the bank is not allowed to charge a prepayment penalty after a term of 10 years. So you can use the current interest rates for your follow-up financing. If you increase your repayment, you can - as in the example - save a few years on the loan term at the same rate

Land charge transferred for follow-up financing with a change of bank

Follow-up financing must also be secured via the land register. For this purpose, the land charge can be transferred to the new bank.

Conclusion: Follow-up financing for real estate loans - 10 years of savings

By a early follow-up financing in combination with a possible higher repayment you can save many years of loan terms. In our example we could 10 years credit term save. It is therefore worthwhile to make use of the special right of termination after a loan term of 10 years and to obtain a new offer for financing the property. You will find the best conditions in various Mortgage calculators on the Internet. You can either use this offer to renegotiate the conditions with the existing bank or to go to another to switch providers.

Appendix: The follow-up financing data on which the chart above is based

Repayment schedule for the first 10 years

YearRate (EUR)Interest portion (EUR)Repayment portion (EUR)Remaining debt at the end of the period (EUR)
1 year1250 € installment1000 € interest250 € repayment299750 € remaining debt
2 years15000 € installment€11819.88 interest€3180.12 repayment293764.28 € remaining debt
3rd year15000 € installment11690.33 € interest€3309.67 repayment€290,454.61 remaining debt
4th year15000 € installment€11555.48 interest3444.52 € repayment287010.09 € remaining debt
5th year15000 € installment11415.16 € interest3584.84 € repayment€283,425.25 remaining debt
6th year15000 € installment11269.1 € interest3730.9 € repayment279694.35 € Remaining debt
7th year15000 € installment11117.1 € interest3882.9 € repayment275811.45 € remaining debt
8th year15000 € installment€10,958.88 interest€4041.12 repayment271770.33 € remaining debt
9th year15000 € installment€10,794.26 interest€4205.74 repayment267564.59 € remaining debt
10th year15000 € installment€10,622.9 interest4377.1 € repayment263187.49 € Remaining debt
total term of the loan 
40 years 4 months

Repayment schedule connection financing

periodRate (EUR)Interest portion (EUR)Repayment portion (EUR)Remaining debt at the end of the period (EUR)
11th year€15,000.00 installment€2,450.19 interest€12,549.81 repayment€238,212.21 remaining debt
12th year€15,000.00 installment€2,324.12 interest€12,675.88 repayment€225,536.33 remaining debt
13th year€15,000.00 installment€2,196.79 interest€12,803.21 repayment€212,733.12 remaining debt
14th year€15,000.00 installment€2,068.16 interest€12,931.84 repayment€199,801.28 remaining debt
15th year€15,000.00 installment€1,938.25 interest€13,061.75 repayment€186,739.53 remaining debt
16th year€15,000.00 installment€1,807.03 interest€13,192.97 repayment€173,546.56 remaining debt
17th year€15,000.00 installment€1,674.50 interest€13,325.50 repayment€160,221.06 remaining debt
18th year€15,000.00 installment€1,540.64 interest€13,459.36 repayment€146,761.70 remaining debt
19th year€15,000.00 installment€1,405.42 interest€13,594.58 repayment133,167.12 € remaining debt
20th year€15,000.00 installment€1,268.85 interest€13,731.15 repayment€119,435.97 remaining debt
21st year€15,000.00 installment€1,130.91 interest€13,869.09 repayment€105,566.88 remaining debt
22nd year€15,000.00 installment€991.56 interest€14,008.44 repayment€91,558.44 remaining debt
23rd year€15,000.00 installment€850.84 interest€14,149.16 repayment€77,409.28 remaining debt
24th year€15,000.00 installment€708.72 interest€14,291.28 repayment€63,118.00 remaining debt
25th year€15,000.00 installment€565.14 interest€14,434.86 repayment€48,683.14 remaining debt
26th year€15,000.00 installment€420.12 interest€14,579.88 repayment€34,103.26 remaining debt
27th year€15,000.00 installment€273.65 interest€14,726.35 repayment€19,376.91 remaining debt
28th year€15,000.00 installment€125.73 interest€14,874.27 repayment€4,502.64 remaining debt
29th year€4,511.40 installment€8.76 interest€4,502.64 repayment0 € remaining debt
total term of the loan 
19 years 4 months

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