With a forward loan, homeowners can secure a favorable interest rate for their follow-up financing in advance before the fixed interest rate expires. However, due to the additional interest surcharge, investors should carefully consider whether taking out a forward loan early is worthwhile for them. We have summarized the most important, potential influencing factors on the financing decision.
ECB tightens the reins
After years of ultra-loose monetary policy, the European Central Bank (ECB) has tightened its monetary policy in view of high inflation rates – the key interest rate is currently 3.75 percent. The main goal of the central bank: ensure price stability.
The increase in the key interest rate also has a direct impact on consumers seeking real estate financing. However, many homeowners are still tied to another loan agreement and will therefore only be able to agree on follow-up financing for their remaining debt in a few years. One way to secure building interest rates now for future financing is the so-called forward loan.
Definition: forward loan
A forward loan is a normal annuity loan for follow-up financing, which is taken out at a fixed interest rate and for a specific term. But in contrast to other loans, you can agree on a forward loan up to five years before the end of the interest rate fixation period of the old financing and thus secure the current interest rate as financing interest. However, the fixed interest rate and the payment only take place at the end of the current construction financing.
Forward loans give homeowners planning security
The advantage of a forward loan: Borrowers have a high level of planning security regarding their future financing. This means homeowners don’t have to worry that expensive follow-up financing with high interest rates will be waiting for them after the old financing ends.
Bank charges additional surcharges
Since banks also have to protect themselves against financial losses, this type of loan is accompanied by an interest surcharge. According to reports from “Finanztip”, this is usually between 0.01 and 0.03 percentage points per month lead time. This means: If you take out a forward loan three years before the fixed interest rate expires at an interest surcharge of 0.03 percent and the current loan interest rate of 4 percent, the result is a fixed interest rate of 5.08 percent (36 * 0.03 + 4 ) for the loan. Since the contract is binding, property owners must think carefully about whether they want to accept the contract at the agreed interest rates. In the worst case, forward follow-up financing is more expensive due to the additional surcharge if interest rates do not continue to rise but remain at the current level or fall.
Interest surcharge depends on the length of the lead time
So when does it currently make sense to take out a forward loan? On the one hand, the price of a forward loan depends on the length of the lead time. According to the financial salesman and inventor of the forward loan, Dr. Small: The shorter the lead time for a forward loan, the lower the surcharge the bank charges for this type of loan. The reason for this is obvious – with a shorter lead time, the bank can better assess the future interest rate situation than if the loan agreement is still five years away.
Development of building interest rates depends on the key interest rate
In order to find out whether a forward loan is worthwhile for the homeowner, you have to make assumptions about future interest rate developments.
According to assessments by financial expert Julian Trauthig, which he shared with SWR, building interest rates depend heavily on the development of key interest rates. If these continue to rise, mortgage interest rates should also continue to rise, according to the expert. According to Trauthig, a further increase in key interest rates cannot be ruled out in the near future given the volatile market and dynamic situation.
Editorial team finanzen.net