Prepayment penalty

Hello,

so far we have financed our rented apartment with a 10-year KfW loan and a loan from DZ HYP. The KfW loan was replaced yesterday by a new 5-year loan and the DZ HYP loan’s fixed interest period ends on 5.5., meaning it can be regularly redeemed at the beginning of November (from the same new 5-year loan) or it was planned to redeem the DZ HYP loan early. Today I already received an email from my banker at VR-Bank that DZ HYP would agree to an immediate repayment for a prepayment penalty of 1831.70 euros (I have not yet received it by mail myself). However, this makes it pointless, especially since we only have to pay 0.25% commitment interest from 1.9.

Key data of the loan: principal balance as of 31.03.2014: 64,695.54 euros, installment 543.62 euros, interest 5.44% p.a., initial repayment 2.0%, disbursement was on 5.5.2004. If I roughly calculate the interest due until 5.11., I come to about 2080 euros.

Is the reinvestment interest rate really to be set so low for the bank that practically 90% of the interest is incurred as a prepayment penalty?

Regards, Jens

With 90% you are already well served. According to your calculation, we now have to pay over 100% because we are selling... Banks haven't made any margins on construction financing loans for years!!! CrossSelling is the margin driver here...

Is the reinvestment interest rate for the bank really to be set so low that practically 90% of the interest is incurred as prepayment penalties? s

What interest rate do you get for half a year = fixed deposit / overnight money? I don’t mean special offers or similar, then not much remains above 0%. Federal notes with short maturities even had negative interest rates last year!!!

Hello

only consumer protection can recalculate that, for example. Basically, you can now conclude the follow-up financing via a forward loan anywhere. The first 6 months should be without an interest surcharge.

Where is the KfW loan? Also with DG Hyp? You are probably trapped at DG Hyp due to the mortgage...

Banks have not been making any margins on construction financing loans for years!!! Cross-selling is the margin driver here...

Nobody probably disputes that cross-selling is always a good source of income, but where do you get your wisdom from? I claim the opposite and say that especially long-term construction financing is a solid basis of the long-term interest margin contribution for many banks and creates the possibility to survive permanently as a bank and not have to live hand-to-mouth.

Most banks currently only make money with mortgage financers because they do not refinance in a structure-congruent manner. That means they take the "cheap" money from the savings account (payable at any time) and lend it out at a high cost (for 10 or more years). However, if the loan had to be refinanced on the capital market (e.g., through [Pfandbriefe]), many low-cost providers would have negative margins in their books.