When the time has come for follow-up financing (end of fixed interest rates), banks rely on the inertia of their customers. Vigilance is required here. With follow-up financing with the same bank, the customer does not get the best conditions. Initially, building owners are not afraid of costs or effort for a cheap building loan.
You haggle over every dollar. You invest a lot of time to find the best building loan. Over the years, this momentum wears off. Many builders simply accept the offer of their house bank for follow-up financing. It seems cheap and after all, you have had good experiences.
Loyalty to follow-up financing is punished
Especially when it comes to follow-up financing, banks mercilessly exploit the loyalty and convenience of their customers. Experience has shown that such offers are usually 0.5 to 1% above the market average building rate. Banks have little work to do with follow-up financing. The customer has already proven its reliability and creditworthiness. As a result, the bank takes less risk. This should give the builder more favorable terms for his follow-up financing.
But far from it. Builders have to fight for cheap follow-up financing. Most of the time, banks don’t even bother to offer their loyal customers a serious offer for follow-up financing. The remaining credit debt at the end of the fixed interest rate and the remaining term of the construction loan is usually missing. Not to mention the repayment schedule.
Take care of follow-up financing in good time
Builders do not have to accept this. Fortunately, there are even more providers who are really happy if you as a customer conclude follow-up financing there. Therefore, you should also check offers from other banks before your interest rate fixation expires.
You need a lead time of six to 12 months. This leaves enough time to find the right providers for their follow-up financing. The game is the same as refinancing. Banks often make little difference.
Many banks also offer a so-called forward loan as part of follow-up financing. With a forward loan, you can secure low building interest for your follow-up financing. A forward loan is free of charge for up to 12 months at many banks.
In return, the customer undertakes to make follow-up financing from this bank. A forward loan is used far too little for follow-up financing. A forward loan for follow-up financing is particularly interesting when the building rate is cheap.
In case of follow-up financing with several loans
If you have financing that consists of several loans and different fixed interest rates, you’re already trapped. Basically, such a division makes sense. If construction interest rates rise, this only affects the part of their total loan installment in connection with follow-up financing. Mortgage lenders prefer to recommend such a strategy. After all, this argument cannot be completely dismissed. After all, it offers customers more interest rate security.
But the reality looks different. Once the fixed interest rate has ended, it is not possible to have a partial loan rescheduled. The old bank blocked the first rank in the land register. There are only a few banks that enable cheap follow-up financing, even if it is not in the first place in the land register. As a result, partial debt rescheduling is almost impossible. This gives the builder his best asset against the bank.
As a result, the borrower has an extremely bad negotiating position with his bank. Another problem with the follow-up financing of partial loans is that banks only grant loans for building finance from $ 50,000. If the remaining debt is lower, the bank puts a heavy interest premium on small loans.
Building loan tip follow-up financing
Take care of your follow-up financing in a good time. A lead time of six to 12 months should be sufficient for this. If you have low building interest rates, you can also take advantage of a forward loan. Don’t let your bank tell you that follow-up financing from another provider would be too expensive. In reality, a change to another bank usually does not cost more than 0.2% of the loan amount (transfer of land charges).
You do not have to compile all the documents you need for follow-up financing. Most of the time you have these documents ready from the first financing. Furthermore, there are no costs for the valuation of the property. If the new Bauzins their follow-up financing as low as 0.1% under it, the interest savings are higher than the cost of follow-up financing. Sometimes the new bank even pays the land transfer costs. The only thing you still need is a current land register extract.