Rollover or follow-up financing?

Prolongation means that after the expiry of the fixed interest rate of the initial financing, the follow-up financing with the provider or. The bank continues, which already granted the first construction financing loan. As a rule, this can be done easily and quickly. In most cases, the borrower automatically receives an offer from the bank providing the initial financing to roll over the initial contract. You can then immediately sign or renegotiate, but also change the provider, because after the end of the term of the initial financing, there is no contractual obligation, which is why each of the borrowers can then freely choose the provider.

The prolongation of the initial financing can be expensive

The prolongation – i.E. Follow-up financing with the bank providing the initial financing – should be viewed as a new, freely negotiable loan agreement. But there is also no obligation to enter into the follow-up financing with the bank that had already granted the first construction financing loan. It is important to consider a rollover a year in advance out of self-interest. Because it is usually not a good idea to simply take over the general conditions, terms, monthly installments from the initial contract and continue with them. Why?

Many house banks use the "home advantage" and the "comfort" of the customer. Because switching to another bank involves a certain amount of effort. The fact that this expenditure is usually not very large, however, knows the fewest borrowers. Banks that provide initial financing are happy to take advantage of this convenience. In the first step, the customer – without having already taken care of it – therefore does not immediately receive the most favorable interest offer, but one at comparably more expensive conditions.

In addition, during the term of the initial contract, the parameters have usually changed: interest rates have become more favorable, household income and savings potential may have changed, and the property to be financed may have increased in value and the conditions for free unscheduled repayment rights have been improved by the bank without being offered to you. This is why every prolongation offer should be renegotiated.

Do not allow yourself to be put under time pressure during the prolongation.

The time pressure arises automatically if you do not proactively approach your construction financing bank. Banks send you unsolicited offers for prolongation only shortly before the initial financing expires. Then time is running out to get comprehensive information and research how you can make the follow-up financing optimal, flexible and money-saving. Your negotiating position is then weakened, which banks in turn use to their advantage . If you simply sign the offer that is sent to you, you will certainly not get the best possible follow-up financing.

Construction financing rollover – how to negotiate an initial contract

This time should be taken. Put the initial contract to the test. Evaluate what may be better to do in the future as z. B. The issues

  • Special repayment options
  • Rate adjustments during the term
  • Repayment adjustments during the term
  • Combination loan instead of annuity loan.

It can be z. B. Pay off now in the low-interest phase to conclude a term to full repayment. A so-called full amortization loan, which covers the entire period until full repayment of the contract, costs somewhat higher interest than a short fixed-rate loan. But this is how you secure the currently extremely low interest rates until full repayment.

So this is an individual decision, but you should also discuss with an experienced construction financing consultant. It makes sense to "speculate" especially if you invest the resulting monthly savings directly back into monthly repayments. Or even increase the monthly repayment amount consisting of interest and repayment of principal. Both ways lead to a faster repayment of the total loan. And the faster the loan is repaid in full, the more money you can ultimately save.

Switching providers at the end of the term of the initial financing is simple

Experience shows that almost all borrowers overestimate the cost of switching to a cheaper provider. Because of this misjudgment, many take advantage of the prolongation offer of the first-financing bank. Also because it is the path of least effort. The result: almost 70 percent do not change providers for follow-up financing, but use the rollover option instead. Banks use this to their advantage and make existing customers rollover offers that are slightly higher than the interest rates currently offered by other providers.

If we look at the third of borrowers who did not choose the rollover option, we see that they could save significantly. The cost of switching banks is well below 1 for the best providers.000 euros. On the other hand, you can take interest rate advantages of 0.20 percent or more if you reschedule the debt. This interest rate advantage may seem small, but over the entire term of a loan, potential savings of four or even five figures are possible.

The follow-up financing with another provider knows no significant hurdles

A change of provider for follow-up financing leads to a change in the land register and may entail a review of the actual value of the property being financed. This review of the property value will be positive in the vast majority of cases today. Because in the last 10 years the real estate values have increased. A higher property value is not only better security for the bank, but also has a direct effect on an even more favorable interest rate.

As a rule, the new lender takes care of the complete processing. Your additional expense in changing providers is kept within narrow limits. To do this, you usually need

  • Salary statements of the last months, the real estate
  • And any documents you had already submitted during the initial financing process.

The only additional costs that a change of provider may incur are fees for changing the land register entry, which amount to about 0.2 percent of the land charge. Some banks take over these fees and also take care of the land register change.

Obtain comparison quotes for follow-on financing before completing the rollover

Take the time to put the initial contract to the test and evaluate what you might be able to do better. Important issues in this assessment are

  • Free special repayment options
  • Rate adjustments during the term
  • Repayment amount (for faster freedom from debt)
  • Cost of monthly interest and repayment services after expiry of follow-up financing
  • And of course the term or. Fixed interest rate of the contract

Whether to roll over or switch providers is a tricky decision that should also be discussed with an experienced – and above all bank-independent – construction financing advisor. Speculation" makes sense especially if the resulting monthly savings are directly reinvested in the monthly repayment. Or even increase the monthly repayment amount consisting of interest and repayments. Both ways lead to a faster repayment of the total loan. And the faster the loan is repaid in full, the more money you can ultimately save.

Seek consultation with non-bank providers for rollover and follow-on financing

As a rule, you should inquire about follow-up financing with other providers as early as 12 months before the initial financing expires. So you can get comprehensive information, weigh things up and compare several offers at your leisure – and decide whether prolongation is the best option for you. A prolongation of the construction financing with the house bank pays off if the remaining debt of the old contract is small and the interest rate difference to other, comparable offers is at most 0.1 percent more expensive , if one adapts the key points of the prolongation offer to new possibilities z. B. In matters of unscheduled repayment or adapting to one's own changed financial capabilities. In all other cases, the change of provider for the follow-up financing is the better, because more favorable solution. In this case in particular, an experienced mortgage broker who is independent of any bank can provide you with the best possible support and negotiate the best possible terms for the follow-up financing.

Rollover with the house bank or follow-up financing with another provider? First compare – then decide.