The portents of recent weeks are now taking shape: construction financing rates are starting to rise again, a reversion to the historically favorable interest rate low that was reached in 1. It no longer seems likely that this will be achieved in the second quarter of 2015. Since may, mortgage rates have risen significantly, albeit still at a low level. The question of the correct strategy with rising building money interest concerns thereby not only neufinanzierer, which are straight in the process of building a house or a free-hold apartment and/or. But also anyone who needs follow-up financing in the next few years; for the latter, the pressure could increase even further if interest rates move to a "normal" level of 4 percent or more. In any case, the likelihood that interest rates will be higher in a year than they are currently has increased in recent weeks.
The references for the building money development is the net yield for 10-year federal loans; this has itself from former 0.05 on now approx. 0.8 percent increase. In addition, in the united states of america there are growing indications that a key interest rate hike – the first since the financial crisis of 2008 – is on the cards. If experts are to be believed, the yield on the 10-year federal bond will be just over 1 percent in a year's time. This isn't quite good news for anyone who needs follow-on financing in the next 3-4 years.
Follow-up financing with a forward loan
A very elegant way to get follow-up financing: you take out follow-up financing today, at a very favorable interest rate, but it won't be paid out for 12, 24, 36 months, or even 5 years. Strictly speaking, this conclusion of a so-called forward loan can be understood as a bet on rising interest rates during this period of time. The advantage is clear: if home loan rates actually rise during that time period, follow-up financing is assured with very favorable interest rates. The disadvantage: if interest rates do not increase during this period, you still have to take out the forward loan, which may then be more expensive than normal follow-up financing.
Despite this uncertainty, many experts today – including those on the consumer advocacy side – advise at least considering a forward loan to secure favorable follow-up financing. However, it is important to compare several offers carefully and not to rely only on the house bank. At least three to four other comparative offers should be obtained (online construction financing brokers are particularly helpful here), because the interest surcharges that banks demand for these forward loans on the current interest rate currently vary between 0.1 and 0.3 percentage points for a 12-month lead time to maturity. With a 3-year lead time, this range is still between 0.2 and 0.75 percent. So with a current construction rate of 1.8 percent, it does make a difference whether you then have to pay 2 percent or 2.75 percent during the term of your follow-on financing. One thing is certain – and this is borne out by the figures of the major construction finance brokers – the demand for forward loans as follow-up financing has risen massively in recent months, in some cases doubling. Also an indication that people are now expecting interest rates on construction loans to rise again.
Security through higher unscheduled repayment options
These agreements are important for everyone – regardless of whether you are negotiating a new contract, a follow-up financing or a forward loan. Higher unscheduled repayment rates written into the contract should definitely be negotiated during a period of low interest rates: this will allow you to pay off your loans faster or. Pay back off schedule if during the course of the contract you z. B. Make an inheritance or receive a special bonus from your employer. Banks are very defensive about this issue. So you have to aggressively ask for it and sometimes also negotiate hard resp. To commission an online construction loan broker to do this for you. Often in the standard contract no or only very small annual special repayment rates are reserved; but these special repayments are the best way to become faster (and also cheaper) debt-free. Of course, banks aim to retain customers for as long as possible while at the same time keeping repayments low, because this allows them to earn money on the interest payments for longer.
Follow-up financing without commitment interest
If their current construction financing contract expires in the next 10 – 11 months and they need thereafter a follow-up financing, you can research today already after construction financiers (better: researched let), which fix this follow-up financing without commitment interest already today to the favorable interest rate. This way you kill two birds with one stone: you benefit from the current interest rate, which is still extremely favorable but slowly rising, and you don't have to pay an interest rate premium for this security.
New bank for your follow-on financing?
This can also be done and is easier than many believe. After expiration of the initial contract, you can easily change the financier or. Change the bank. Usually a land register excerpt is sufficient for this, which is to be submitted and possibly a change in this. But again, you can find providers who will do this work for you and still not charge you any money for this service.
In order to obtain the best interest rate, the most suitable repayment, a maximum unscheduled repayment option or optimal contract flexibility tailored to your life situation – also for follow-up financing – we recommend consulting bank-independent construction financing experts, who you will find at many large direct financiers such as ACCEDO AG. This way, you'll be on the safe side, not doing anything wrong, and you'll have the peace of mind that no additional fee will be charged for the offer preparation and consultation process.