Despite the lowering of the key interest rate by the ECB to a historically unprecedented 0.5 percent, the interest rate for construction financing is not moving any further downward. After the all-time low in interest rates for construction loans at the beginning of May, interest rates have risen again slightly, but this is not yet a reason for hasty action. Experts believe that construction money will not increase dramatically in the coming months. So time enough to explore the market now to secure the tailor-made construction financing that fits your financial plan. Particularly interesting for all, which locked up-to-date an older construction financing and whose contract expires in the next 1 to 3 years. The magic word: forward loan. With a forward loan you can secure the current low interest rates by taking out the follow-up financing today, even if it is only needed in the next 36 months. By the way: Forward loans are also interesting for all those who have concluded a construction financing loan with a term of more than 10 years and are now annoyed by the very high interest rates. Indeed, the legislator allows construction borrowers to terminate their current contracts after 10 years – without giving reasons. What a forward loan does and how it works, you can learn here:
DGFZ yield takes influence on the building loan interest rate
Basically, the DGFZ yield for ten-year mortgage bonds is the basis for the construction loan interest rate: For 30 years, interest rates for construction financing have never been so favorable! Z. B. in January 2000, the interest rate for building loans was still at six percent. Today, you can get 10-year mortgage loans for just over 2 percent. So on the term you can save today really a lot of money. Huete there are providers who offer forward loans up to 5 years. The extent to which it makes sense to take out follow-up financing today that will not be due for another 5 years depends on the expected interest rate development and the costs incurred: the longer the lead time, the higher the interest rate premium.
Forward loan more favorable than ever
If you look at the current offers, forward loans with up to 6 months lead time are usually available without an interest surcharge. After that, a surcharge of 0.01 to 0.03 percent per month – depending on the provider – is due. With a lead time of 2 years, the prospective customer must therefore expect an interest surcharge of ca. 0.2%, with 4 years of approx. 0.5% calculate. For this reason alone, it makes sense to think about a forward loan today that you won't need for 36 months or more. With a standard interest rate of currently approx. 2.4 percent would cost a follow-up financing, which you need only in 48 months with a 10-year commitment around 3 percent. If you took out your construction financing in the early 2000s, you can reduce your interest burden by about half, even with this long lead time. For those who had concluded a 20-year term, the option of terminating the contract after the expiry of 10 years and converting it into a forward loan is more than worth considering.
According to FMH-Finanzdienleistung, the average value of the interest rate development from 1982 to 2012 shows 6.87 percent, a value that is hardly imaginable today, although in the long term one should assume that values around 5 percent represent the normality (our current interest rate level is definitely not to be considered the normal case).
If you need follow-up financing in the next 36 months, you should take out a repayment of at least 2 percent today. We recommend that the forward loan is roughly equivalent to your current monthly repayment – and that you increase the repayment in return. How to get out of debt much faster. With a full repayment over the fixed interest rate (10 years, 15 years, 20 years), you can even count on a bonus that makes the loan even cheaper. Protect yourself against a future rise in interest rates, which will certainly come in accordance with the laws of the market.
A bank change almost always pays off
Experience reports show that banks often try to serve old customers who need follow-up financing with higher interest rates than those offered to new customers. So if you switch to a new bank, you can save a lot of money: Even if it is one to two-tenths of a percentage point cheaper than the previous bank, the savings are already more than the switching costs involved in such a switch. The effort for a bank change is surprisingly clear: you usually need only a new land register extract (what some banks also still you take over). All other documents for the bank change you have yes already, because you had gathered them fully at the conclusion of the initial loan.
Ask the test winner: in the forward comparison test conducted by EURO magazine at the end of 20212, ACCEDO AG won the 12, 24 and 36 months categories. That's why it's best to ask the test winner, which specializes in construction financing and especially construction financing. Click here for the ACCEDO AG test results
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