Forward loans are one of the most popular types of follow-up financing in the current financial market. They offer borrowers the opportunity to take out another loan after an expiring building loan – which is currently possible on very favorable terms.
Interest rates are currently cheaper than ever, which is why many people are asking themselves when and how to apply for a forward loan. We present everything important on the subject in more detail below.
Applying for Forward Loan: Getting quotes early is important
Although most savings banks, branch banks and direct banks on the Internet now have forward loans in their portfolios, there are sometimes big differences between the terms. It is, therefore, best to contact a credit broker who can help you filter out the cheapest offer. Such a comparison is possible to free of charge on the Internet and compares hundreds of banks within a few seconds. Only then can you find a suitable offer as a borrower, which you may be able to present to your house bank or the previous lender.
It is best to get offers for the first time about one and a half to two years before the current interest rate fixation expires. Comparisons can be made online again and again – this way you keep an overview of the current interest rate level on the market.
The next step should then be to submit a favorable offer to the current bank before being rushed to another provider. If the previous lender can offer a forward loan on the same terms, it makes more sense not to change the bank. Here one speaks of the so-called prolongation (extension), which of course involves significantly less effort.
In addition, borrowers should be aware that rescheduling – i.e. switching to another bank – is always associated with additional costs. These include land registry and notary fees, which can be between 01 and 0.2% of the loan amount. For a rough orientation, the following applies here: It is best to switch if the current bank’s interest rate is at least 0.1% more expensive than offers from other lenders.
This is how a forward loan is concluded
Taking out a forward loan is not that complicated in itself and only takes a few steps. The most important prerequisite for this, however, is that the borrower has an ongoing fixed interest rate. This means that the finances his property with a loan that is still running. It is also important that the fixed interest rate ends in no more than five years, i.e. in 60 months at the latest – otherwise, he has to choose another follow-up financing.
If these conditions are met, the borrower must monitor the capital market over a longer period of time to determine the level at which interest rates are moving and developing. It is not only the current trend that is decisive, the course so far in recent years also plays a role. If it turns out that interest rates have decreased significantly in recent years, it makes sense to take out a forward loan.
Then the collection of as many different offers as possible begins. However, these should already be tailored to personal requirements. A not insignificant factor here is the previous loan amount for the first financing. In addition, the age of the borrower, his credit rating and his current financial situation must also be taken into account. In addition to the interest rate, it is important to pay attention to surcharges and other possible additional costs – this is the only way to find the offer with the lowest costs. It can also make sense to make an appointment with the house bank. Loyal, long-standing existing customers often receive special conditions because they represent a smaller financial risk for the bank than new customers.
If the borrower has already taken out a forward loan, it can also make sense to look for a suitable debt rescheduling – this is also an option. If you find a bank with better conditions, you can save a lot of money here. The actual completion of the loan takes only a few minutes and does not require a lot of bureaucratic effort.
When should a forward loan not be concluded?
The worst possible time to take out a forward loan is when interest rates have risen continuously and are again at a high. Then it is better to wait a bit longer and continue to watch the trend until the interest rate drops again. However, if it becomes apparent that interest rates will continue to rise in the coming months and years, you should not wait long to take out the forward loan. Because then you lose more and more time – and end up paying an unnecessary amount of money.
In principle, forward loans can be taken out 60 months before the end of the fixed interest period. However, borrowers rarely apply for a new loan – after all, a lot can still happen in five years. It is ideal to look into the forward loan about two years before the deadline and to look for attractive offers.