Is it even worth extending the fixed interest period?

Hello everyone,

since our financing discussions are now entering the final phase, we also have to decide on the length of the fixed interest period.
As is well known, extending from 10 years to 15 years leads to an interest surcharge of 0.4 - 0.75 percentage points depending on the provider.
Assuming a 2-3% repayment, the monthly burden increases accordingly with 15 years, or the repayment rate is reduced.

Assuming one stays with 10 years and compared to 15 years sticks to a higher repayment/special repayment or, if monthly availability allows, tries, for example, to secure part of the financing sum with a building savings contract at an interest level close to today’s, doesn’t this provide an advantage?

I am not a mathematician, banker, or insurance person, so I usually approach things pragmatically. For me, the best case is always that the amount of the follow-up financing remains as low as possible. I always assume an interest level of 6% in 10 years. I have somewhat neglected the financing/interest costs incurred.

In the end, is it a mathematical question or an "emotional" one (longer fixed interest period = longer interest rate security = more peaceful sleep ;))
What of course no one knows is what interest rate awaits us in 10 or 15 years.

What are your opinions or experiences?

Thanks for the answers

BTK

The term is by the way 25-30 years.
With [Volltilgerdarlehen] the question usually does not arise. :)

Hello,

your forecast with 6% is very high and reasonable. If you manage to repay a lot within 10 years, it certainly makes sense. For most, however, it does not. A fixed interest rate period of 15 or even 20 years is a "must".

There are events in life such as children, illness, unemployment that do not allow for repayment. I would always choose the conservative option. Especially since, according to [Baugesetzbuch], you can terminate the loan after 10.5 years without a prepayment penalty.

That is something everyone can only decide personally for themselves and must be calculated individually. Depending on the forecast of what interest rates will exist after the fixed interest period (10/15/20 years), a 15 or 20 year loan will be worthwhile or not. It also seems that the interest rate jump between the individual fixed interest periods varies from financing to financing. For us, for example, it was very high between 15 and 20 years. For others, this jump was rather between 10 and 15 years.

Since I assume that we will be able to make special repayments at some point (after parental leave and part-time work of the wife), the 20 year loan did not pay off for us, as mentioned above, because the interest rate jump compared to the 15 year one is correspondingly high. The 15 year one, on the other hand, does pay off because we want to make relatively large special repayments by then.

@backbone: In principle, you are of course right. Depending on the equity and loan amount, the offer for the actual loan develops. However, the surcharge of 0.4-0.7 percentage points from 10 years to 15 years or even 20 years remains in place as far as I know. The banks charge for the longer commitment regardless of whether you have 10%, 20%, or 50% equity. The same applies to the interest rate, whether you have 1.5%, 2.5%, or 5% effective annual interest rate, the 0.4 - 0.7 is added on top when the fixed interest period is extended. Or am I seeing this wrong?

Hello BTK,

get an offer from the bank and calculate exactly. In our example, the interest rate would have had to increase to 6.3% at 15 years just to break even. The surcharge from 15 to 20 years was only 0.1%, and for 25 years it was even the same as for 20 years. So the long fixed interest period is definitely worthwhile. I think the surcharge is always the same, regardless of how much equity there is. Or has anyone here had different experiences??

Ultimately, it is always a personal decision - one person places more value on interest rate security, the other repays more in the first years and thus has a lower risk after the fixed interest period.

Best regards