2 financing options

The new conditions have nothing to do with the old conditions. These are two legally independent financings, where nothing can be offset against each other. If the old loan is repaid early, a loss arises for the bank on their refinancing. The result is the prepayment penalty. Period.

Prepayment penalties are repeatedly calculated too high by banks; you should have them checked by an independent party.

If you transfer the old loan to the new property, make sure that the fixed interest period of the additional loan ends on exactly the same day as the old loan. Otherwise, you will be blackmailed by your bank at the extension in x years. Switching to a cheaper bank will then hardly be possible.

The new terms have nothing to do with the old terms. These are two legally independent financings, so there is nothing to offset.

Hello GeorgPuetz,
yes, of course there is something to offset. If I repay the bank 120,000 euros (having to pay 11,000 euros for that) and then borrow 120,000 euros again from the bank (under new terms), this only makes sense if the new terms save me more than the 11,000 euros in fees. Otherwise, this procedure is nonsense.

Regards
Micha :cool:

Hello Micha,

Your consideration is not complete as it stands. It's not just about 120,000, but more.

- The 120,000 probably have a shorter remaining fixed interest period than those you would agree on with the new loan. In a comparison, you would therefore have to compare the conditions of the new loan for exactly the remaining term of the old loan.

- Due to the collateral swap (property change), you need a higher loan than the current outstanding balance of your current loan. You should definitely agree on the additional loan with exactly the same fixed interest period as the current loan. Otherwise, the lender can hit you hard at the end of the first fixed interest period. Legally, they can charge up to nearly twice what is customary on the market (usury limit). I have seen countless cases where lenders exploit such a situation.

- The variable "prolongation" also plays a role in the aforementioned aspects. Since the interest rate for the follow-up financing is not known today, we cannot know which fixed interest period will be economically advantageous. For the whole construct, a break-even interest rate should be determined, up to which rate the conditions for the follow-up financing may increase so that the shorter fixed interest period still pays off.

- Another aspect is the general prolongation risk. For example, if you agree on a full repayment (fixed interest period over the entire term of the loan until full repayment), the loan runs without renewed credit checks according to the current state of affairs. With a loan with a shorter fixed interest period and the necessity of prolongation, changed creditworthiness or changed credit check criteria can lead to refusal of the follow-up financing. In this case, the prepayment penalty payable today takes on the character of an insurance premium.

There are quite a few aspects that need to be weighed in your case.

Otherwise, the lender can really screw you over at the end of the first fixed interest period. Legally, he can charge up to almost twice what is usual in the market (usury limit). I have seen countless cases where lenders take advantage of such a situation.

Hello again,

okay, I simply lack the experience – and I can’t quite imagine (maybe I’m a bit naive) that this situation can be exploited so badly... But if that’s the case, the whole matter really looks very different...

There are quite a few aspects to consider in your case.

Alright, maybe I really thought it was simpler – but by the way: I am not the starter of this discussion – I just wrote my opinion here ;)

Regards Micha :cool:

Hello again,
For me, I think the easiest way is to repay the existing loan agreement with the corresponding VE and, using the amount already repaid as well as the security of the house then transferred to us, to enter a new negotiation round. This way, I am also independent of the current bank and can review multiple offers.
Thank you very much for your opinions.