Subsequent demand for securities by the bank?

Hello dear people and a happy Easter Monday!

Last year I financed some small apartments as an investment at 80 - 90%. For several years now, as we all know, we have been in an environment of rising real estate prices, at least in urban areas.

When I look at the real estate price trends in the USA around the 2008 crisis, I notice that prices fell relatively abruptly (within 1 year) by up to 50%. Now there could be another crisis in the coming years (no one can really rule that out) and real estate prices can fall quickly.

My financing is structured so that I pay off about 5% per year. If, for example, all properties suddenly lose 30% of their value next year, my existing loans are higher than the entire value of the property. Of course, I will still be able to service the loans through the rental income.

But: Can the bank in such a case demand additional collateral? For example, that I assign a [Tagesgeldkonto] to the bank? If they can, will they probably do so? Does anyone of you perhaps even have experience from 2008?

Thank you all for your answers!

Christian

If you have already signed the loan agreement, the terms and conditions are also fixed. As long as you can repay your loan on time, I hardly believe that the bank would have any leverage there.

Look into your loan agreement or the underlying [AGBs]. It should state that in the event of a deterioration of the bank's collateral position, there is a right to provide additional collateral.

Difficult topic. In theory, it would be possible, but rather with 100% financing and higher. It always depends on the loan-to-value ratio and the depreciation. Those who have chosen a short fixed interest rate period of 5-10 years or if your loan is sold to another bank usually lose out. This means the new bank sends an appraiser who revalues the property, and then additional collateral may be required if the depreciation is too high.

Personally, I believe that additional collateral is more frequently demanded when loans are sold. Fortunately, my loan agreement states that the loan cannot be sold.

Furthermore, you cannot compare the USA with DE, as variable interest rates and other constructs were and are used in the USA before the real estate bubble. Long fixed interest rate periods are, to my knowledge, uncommon there.

No.

Wrong. Yes.

However, it is not quite as logical and simple as you imagine.

You can find more details in the loan agreement and/or the general terms and conditions.

Keyword: "Significant deterioration of financial circumstances"

This refers not only to income but also to existing assets, such as real estate.

This (possibly) gives rise to a right of termination of the loan by the lender (or alternatively the possibility to demand additional/different/better collateral).

Thank you for your answers! I take away: That something like this happens is not likely, but if it is stated in my loan terms, it is possible. I will better take a detailed look at my loan agreement again tonight.