Admittedly, the word “follow-up financing” is not particularly sexy. And most homeowners want to get through the second round of their home finance with little effort. Actually a shame, because a few hours would often be enough to save several thousand dollars. We explain how it works and what constitutes the perfect follow-up financing for three different (stereo) types.
The advance planner: safety comes first
The people bought an apartment in the country eight years ago. In April 2021, her first round of financing comes to an end and follow-up financing for her real estate loan is pending has long been interested in financial issues and has been closely monitoring monetary policy and the interest rate market for several years: he wants to secure the lowest possible interest rates for his family for the next round of financing.
Franziska recently became pregnant and financial security and predictability are now particularly important to prospective parents. Since mortgage lending rates are once again extremely cheap, decides not to wait any longer and takes out a forward loan. With this type of follow-up financing, current interest rates can be “frozen” for a small premium. If you expect interest rates to rise, you are on the safe side. The disadvantage: the longer this loan is taken out in advance, the higher the interest premium. For the family, who secured the loan 24 months in advance, this surcharge was 0.44 percent.
When they first financed, they set their monthly installment at 1,000 dollars. At that time, however, the interest rate was significantly higher at 4.7 percent. Since the borrowing rate for follow-up financing of your real estate loan is only 1.71 percent despite the forward premium, you now have the choice of either lowering your rate significantly or increasing the repayment at a constant rate. Planning security is the most important thing for the two prospective parents and they want to have an overview of all the costs they will face until the end of the financing. Therefore, you opt for the second variant and pay back your real estate loan with the follow-up financing.
The perfectionist: the best of the best
Works as a software developer in a large company. For all purchases, she attaches great importance to purchasing the highest quality products at a good price – regardless of whether it is a new cell phone or construction finance. Twelve months before her current building loan expires, she begins to obtain and compare offers – both from the house bank and from other providers. The result: The rescheduling of your loan to another bank is not only significantly cheaper, it can also better adapt the further financing conditions to your individual situation.
The best financing proposal is not the one with the cheapest interest, she is looking for the perfect all-round package in which all conditions are right. The background: The software developer is already certain that she wants to reorientate herself professionally and become self-employed in the next few years. Therefore, she decides on an offer with a free repayment rate change in order to be able to reduce or increase the monthly rate in case of doubt.