Split credit demand into several loans?

Hello everyone,

I am currently considering whether it makes sense to split the credit requirement into several loans – and if so, how.

I have read a lot in this category and have the feeling that the tendency for most is towards one large loan with a long fixed interest period (15, 20, 20+ years).

There are three reasons that make me think about a split:

1) Sale of condominium after completion and move-in of the house à first loan, variable (alternatively, a one-time high special repayment could also be contractually agreed, and this variable loan would not necessarily be needed).

2) Avoid provision fees à they are incurred after 6 months, but the construction period is 9 months; the first loan should be chosen in such a way that the sum can be drawn within 6 months and corresponds to the construction progress, the second loan would be taken out with a time delay of a few months accordingly.

3) To be able to quickly repay at least part of the total amount with a short fixed term and accordingly lower interest burden. Secure the rest long-term.

Regarding 1) As already said, not necessarily necessary, especially since the interest rate is about at the level for a 10-year fixed term.

Regarding 2) The suggestion/trick came from the bank – as with 1), it would certainly be possible to agree on a long provision-fee-free period contractually, but I do not know whether/how that would affect the offered interest rate.

Regarding 3) This is the thought that concerns me most. You would have a mixed interest rate (I am thinking of loan 1 with a 5-year fixed term, loan 2 with a 10-year fixed term), but would have to ensure that the package with the shorter fixed term is repaid first so that it is off the table after 5 years and you don't have to renegotiate and conclude a new agreement for a small remaining amount, especially since you are then tied to the bank. But that would also be contradictory, since you would actually have to prioritize repaying the loan with the higher interest rate.

Therefore, my questions: Are there people here who have split? If yes, how and why – if not but it was considered, why did you decide against it?

Thanks and greetings to all!

We only have the usual split with an annuity loan and a €50,000 KfW loan. Both with approx. 2% initial repayment. The annuity loan can be repaid early with 5%, KfW can be repaid early without limit.

With special repayments, I primarily repay the classic annuity loan, as the interest and thus the savings are highest. Whether I later use special repayments to pay off the KfW loan depends on the further interest rate development. The more it is split, the more difficult the decision becomes as to what should be sensibly repaid.

Completely paying off a loan only makes sense if you will probably earn less from then on (retirement/ desire to have children). As a rule, however, income increases over the years. If a rate is eliminated now, I may have too much left over. So only the special repayment options remain. But if I exhaust those as well, I restrict myself in terms of repayment.

Another advantage of having only one fixed interest period is the option to switch to other banks when the follow-up financing is due. If the loans are split and not repaid within the first fixed interest period, then I can hardly switch.

but should make sure that the shorter tied package is repaid first

That is, in my opinion, the catch. Because actually you want to repay the loan with the highest interest rate first. Based on this consideration, I quickly discarded the idea of splitting or did not pursue it further intensively.

Hello,

the idea of selling the ETW sounds plausible. Maybe choose a fixed interest period of 1 year instead of a variable interest rate. But I don’t know what the interest rate differences are there.

I currently consider taking out a loan because of the commitment fees not to be promising. Of course, the interest rates can remain low, but what if the interest rates move upwards in the next 6-9 months and you regret it?

You can now take out 2 loans with 2 fixed interest periods and negotiate a corresponding commitment fee-free period. You should always keep in mind that there could be problems with refinancing in such constellations. If the short loan is not repaid and financed afterwards, there could be problems with the ranking in the land register. It would always be subordinate. So you are "bound" to the financing bank. Subordinated loans are not offered by many banks and, if at all, only with interest surcharges.

That no bank likes to go into second lien, we have already established. Either not at all or under worse conditions. I would also not want to distribute multiple loans among different banks.

Yesterday we had another bank appointment and received more figures. It was quite enlightening. Especially regarding the variable interest rate for the separate loan, which is supposed to be paid off in one go through the sale of the [ETW], there are significant deviations from the counteroffer from 2 weeks ago. The figures from yesterday look promising, which would mean for us loan 1 fixed for 10 years (80% of the required amount) and loan 2 variable (20% of the required amount).