How exactly does the loan repayment work? What do you have to consider if you want to repay a loan early? We explain the different categories of loans and what you should pay particular attention to when it comes to real estate loans.
What are the options for repaying loans?
How a loan is repaid depends on the type of loan. There are mainly three types:
- Term Loan: In this category, the loan repayment is done by agreeing on a fixed due date. The entire loan amount must be repaid on this date, which is made clear by wording such as “repayable on October 30, 2021”. During the term of the loan, only interest payments are due that have to be paid to the bank at the agreed intervals - monthly, quarterly, semi-annually, annually.
- Installment loan: Here, the loan is repaid by repaying in constant installments, which you have to pay to the bank on fixed dates. You pay this at the same time as the interest. The interest rate decreases from year to year, as this is calculated on the remaining debt. As a result, the total rate of repayment installment and interest payment decreases with each passing year.
- Annuity loan or repayment loan: The loan repayment takes place in fixed installments, which consist of a repayment and an interest portion. The ratio of the two shares changes over the term of the loan. However, the total charge on the specified payment dates remains the same.
What do I have to consider when repaying the loan early?
The loan repayment runs differently, depending on the agreed conditions. Long terms of more than ten years are not uncommon for extensive financing – for example for a vehicle or a property. You should therefore get good advice on which loan repayment does not exceed your own funds in the long term.
Nevertheless, it can always happen that a loan no longer suits life. There are many reasons for this: an inheritance allows full repayment in one fell swoop, the current interest becomes a burden, or a job change makes it necessary to sell the property. Loans can also be repaid early in most cases. But the bank misses out on interest gains that it expected over the term. To compensate, she will demand a prepayment penalty from you.
It is irrelevant whether you terminate the loan early, replace it for debt restructuring or want to repay it. However, the bank is not entitled to a prepayment penalty in every case. Mistakes in the contracts allow borrowers to revoke or exit loans early – without exorbitant extra costs.
Do you have a loan that has now become a burden? Then use our online check now without obligation to see if you can get off early. You will then receive all further steps in the free initial assessment - directly in the mailbox.
What do you have to consider when repaying a real estate loan early?
Real estate loans differ from most other loans because of their high financial volume and their very long term. The interest rates are therefore often significantly lower than with short-term loans. If you have to part with your property, for example, you probably also want to get rid of the associated financing. In principle, this is possible early – i.e. before the end of the term. But as with other loans, your bank will demand a prepayment penalty.
However, you can reduce this or get back an already paid amount, in the event that errors can be found in your contract. This includes e.g. B. incorrect cancellation instructions or inaccurate instructions on the prepayment penalty, as required in Section 502 of the German Civil Code (BGB). With us, for example, you can take advantage of a free contract review, in which your contract will be examined with regard to insufficient mandatory information.
You want or need to sell your property - the prepayment penalty is the last thing you want to deal with. We'll be happy to do that for you. your first step? Our online check - of course free of charge and without obligation.
I would like to repay my real estate loan early - how do I proceed?
To successfully reduce or completely avoid the prepayment penalty, proceed as follows:
Step 1. Check the closing date on your home loan agreement
If the contract was concluded between March 20, 2016 and today, you can use our free initial assessment.
Step 2. Fast and free contract review
You will receive an assessment from our experts in banking law as to whether the prepayment penalty could be avoided or recovered from you.
Step 3. Enforcement by our experts
We make sure that you get your rights and that you can get out of your real estate loan without extra costs. You just want to check how high the prepayment penalty will be? Sure, that will understand. But don't forget to check the payment for your eligibility as well and claim it back! It's all easy with our free online check.
Can legal action worsen the relationship with my bank?
You don't need to be afraid that legal action against your bank for the prepayment penalty will deny future opportunities for a loan. The bank as an institution will continue to have an interest in winning and retaining customers in the future.
You also have a legitimate right to be fully and correctly informed of your rights by your bank. Many banks failed to do this. Do not hesitate to pursue these claims legally and recover or reduce the prepayment penalty.
Free initial Consultation: Review of your real estate loan agreement
We offer you a free review of your contract prior to a mandate. We will check the cancellation policy for you free of charge and whether your contract also contains incorrect mandatory information. This will tell you if you can avoid or recover a prepayment or non-acceptance penalty. We will show you how much money you can save, what our work costs and when a result can be expected. Then you decide whether you want to commission us.
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