As soon as the fixed rate on the first mortgage expires, ben willuhyou take follow-on financing, which is cheap at best. In the following we explain everything you should know about this and what interest you will receive at the moment.
What is follow-on funding?
Post-financing is a continuation of construction financing with a new loan. If the fixed interest rate for the first financing expires, but a residual debt still needs to be financed, thenuhfollow-on funding is required. It is advisable to deal with this early. After all, you can significantly reduce the interest costs with a cheap follow-on loan or noticeably reduce the monthly installments for the house and thus the financial burden.
The topic should be addressed about six to nine months before the end of the period. Your bank will send you an offer no later than three months before it expires. You should have looked around for alternative financing by then. you kuhcall You can also easily calculate the upcoming follow-up financing online. There you will find the best interest rates in comparison and kuhcan calculate your new rate.
How does follow-on funding work?
If the debit interest on the first property financing expires and the loan has not been repaid in full at the end of the interest period, another loan is taken out as follow-up financing. you kuhYou can either continue the follow-up loan in the old bank under new conditions, or you decide to restructure and take out follow-up financing at a lower interest rate in another bank.
The new loan is taken up under the new conditions for the remaining debt. If the current interest rate is lower than when the first construction loan was taken out, then you can expect lower interest rates. If, on the other hand, the interest rate has increased over time, this is reflected inuhHere, the interest in the subsequent financing is felt. This factor should be taken into account when implementing the first funding and possibly beyond.
How high are the interest rates for the subsequent financingtion?
You can find out how high the interest rates for follow-on financing are by comparing different credit institutions or by talking to your own bank. It is worth paying attention to the current construction interest rates charged for construction loans with a low financing expiry date. This means that the ratio between the value that the bank assesses for the house and the construction loan that must be restructured is, for example, 60%.
With a loan amount of EUR 150,000 and a loan-to-value ratio of up to 60 percent, you would receive an interest rate of around 4 percent for follow-on financing in October 2022 with a fixed interest rate of five years. However, these are only average values, the actual interest must always be calculated individually.
What is the best way to prepare for follow-on funding?
The best way to prepare for follow-on financing is to first take a look at your own life situation and reassess it. Is there an inheritance to count on or has money been saved in addition to the building loan? Have income or expenses changed? If there is money available with which a large part of the secondary loan can be repaid kuhIf so, then it is worth doing this in the long run.
At the same time, however, the condition of the property should also be analysed: Are there major modernizations that require additional capitaluhis taken? Should changes be made? MuhDo you want to fulfill additional life dreams? These factors determine the appropriate follow-up funding. The remaining money that you owe the bank at the end of the fixed interest period can be repaid either in whole or in part.
By reducing the loan amount, you save a lot of interest. leguhIf, on the other hand, you earn additional money, then kuhYou can apply for this at the same time as follow-up funding. If the total amount does not exceed the sum of the first financing, then no additional security will be entered in the land registry. The previous monthly rate can also be changed. This is always useful if income or expenses have changed. with an huhhere interest rate, the loan can be repaid faster, unless the interest rate has risen sharply.