Early repayment can be problematic if you don’t know the terms. In the case of real estate in particular, it is common to take out a loan. Because you rarely pay for a house or apartment in cash. The path then goes through the bank, which then grants you a loan to purchase the property. Of course, it would be fatal to get a single offer from a bank. In this respect, it is advisable to compare the different loan offers.
Cancel real estate loans
Most contracts for the desired loan have a term of 25 to 30 years, with the fixed interest period for real estate loans often ending after 10 years. As soon as this fixed interest period has expired, further financing can be discussed with the bank, or it is also possible to ask other banks which conditions they offer for follow-up financing. As a customer, you have a little longer leverage here because you can still switch to the competition after the fixed interest period. This is a means of pressure for the bank in negotiations on follow-up financing.
Premature termination of the loan
Of course, it also happens that borrowers want to cancel their real estate loan before the fixed interest period expires. There can be various reasons for this: for example, that the object should now be sold. So then the time would have come to repay the loan. In order to find out exactly to what extent a termination can be asserted and what conditions must be in place for it, the loan agreement made at the conclusion is very helpful. In this loan agreement, the conditions for repaying the loan were specified at the time of the conclusion. So also to what extent it is possible to repay early. As a customer, you can find out whether special repayments are possible free of charge or if it has been determined that early repayment is not possible at all, you have to negotiate with your bank about a transfer or rescheduling. If you would like to repay the loan early, even though this is not provided for in the loan agreement, the bank will most likely request a prepayment penalty. This prepayment penalty is reflected as a fee as compensation for the interest that you no longer pay due to the early repayment.
Follow-up financing as a repayment option
However, the previously mentioned follow-up financing can also be a way of early repayment of the real estate loan. However, the bank can also refuse this if the termination only aims to get better terms regarding the interest. If the contract is terminated, the bank will most likely also request a prepayment penalty.
With early repayment, it is always such a thing. Banks don’t like to see this, although of course they get their loan back early, they lose valuable money that they would have earned with the interest. In order to avoid such problems right from the start, a special right of termination should be agreed in the loan agreement.