The low-interest rates are a temptation to realize the dream of owning a home, but they also awaken the desire of the people who have long since realized that dream not only for tenants. Anyone who has taken four or five years a mortgage and laid down an interest rate of 5 percent, sees the current conditions with suspicion. Currently cost mortgages with interest rates fixed for ten years, only 4.25 to 4.50 percent. This awakens in many a private citizen the understandable desire to change horses.
But this is dangerous. The debtor must take all costs into consideration. First, the compensation falls on to get out of the old contract. In addition, in many cases, a fee for the transfer of the mortgage. Since the interest benefits quickly melt away. Perhaps the credit in the following example is even more expensive.
The financial question: Modernization may be profitable
An engineer is 43 years old and has taken out a loan of EUR 200 000 four years ago. The interest rate of 5 percent has been fixed for ten years. Although this is much in retrospect because the normal loans at that time cost only 4.5 percent. The premium of 50 basis points is, however, permitted. First, the loan exceeded the lending limit first-rate mortgages, and second, the engineer insisted on two special rights. He wanted every year up to 5 percent of the nominal debt, ie up to EUR 10 000, can wipe off schedule and he wanted to be able to change the scheduled rate of interest and principal during the fixed rate period time.
Of the implicit options of how these privileges are called in technical language, the Eigenheimer did not exercise today. That is, numbers that the loan, which is 5 percent per year, has so far been repaid with the usual repayment of 1 percent plus interest saved. The 48 installments of 1,000 euros have reduced the debt on 191,164 euros.
This is a thorn in the engineer. He wants to increase the rate in the future to 1500 euros per month, and he wonders even to replace the loan into a new contract. The increase in rates is possible because the wife has been working for a few months back and provides a second income, and the exchange appears the couple appealing because nominal interest rates on loans fell to 4.25 percent with a ten-year fixed interest rate.
The bank suffers damage
The advantage of 75 basis points is a dangerous temptation, and the risks are clear if the future is displayed in the cash flows. The loan is currently at 191,164 euros. If by the end of the fixed interest rates in the future of 1500 euros per month will be paid the remaining debt in six years may drop to 174 120 euros. They hope to make unscheduled of every 10 000 euro paid in six years even a residual debt of 64,000 euros will be possible. The two values are of utmost importance, because they are the basis of the compensation that the engineer has to pay this contract for the phase-out of the.
The bank suffered a loss when it releases the debtor under the contract. It does not matter whether it loans money to a new customer or whether it invests the capital in the securities market. In both cases, suffer a loss, and the Federal Court of Justice has clarified in recent years in many processes that the bank can not be forced to borrow the money again as mortgage. Instead, the requirement to invest the money in bonds is considered.
This leads at the moment of course, on the question in which papers the repayments the engineer to be created. A look at the financial market this newspaper shows that are paid for public bonds with six-year residual maturity about 3.3 percent. However, the re-investment in mortgage bonds brings a return of 4 percent.