If you would like to fulfill your dream of owning your own four walls, this is hardly possible without a construction loan. If the debit interest period ends or if your building loan is unfavorable because you have to pay high interest, you can change your building loan, but you should first check thoroughly whether a change is worthwhile. Not always worth such a change, as costs are incurred. Especially now that interest rates on construction loans are lower than ever, a change can be profitable despite possible additional costs.
When a construction loan change is possible
If you are dissatisfied with your construction loan, you should check whether the cancellation policy is faulty. In this case, an early contract exit is easily possible. If your building loan has been in existence for at least ten years, you can cancel the contract at any time, and the bank can not claim any compensation. If the interest on the construction loan is high, a termination can occur, combined with a change to another bank, but then often charge fees.
Fast debt-free with special repayments
Already when taking out a construction loan, you should arrange for free special repayments. You reduce the remaining debt with special repayments, you are faster debt free again. Special repayments do not incur any taxes. Special repayments are stipulated in the contract, they are made by the borrower on a voluntary basis and usually amount to five percent of the loan amount annually. However, you can also arrange higher special repayments for many providers. If you would like to sell the financed property or change the construction loan, special repayments will help you as the prepayment penalty you pay to the bank will be lower. If you would like to make special repayments, you should be careful to reserve sufficient financial reserves for unforeseen events in order not to have to use a costly credit line.
Exploit favorable interest rates with forward loans
In order to secure good conditions for follow-up financing, if the interest is just favorable, you can apply for a forward loan. This is already possible if the debit interest period has not yet expired – you save the early repayment penalty. For the provision of the forward loan, however, you must pay an interest premium, the amount of which depends on the loan amount and the lead time. The forward loan becomes more expensive the longer the lead time. The advantage of a forward loan lies in planning security, since you already know what your follow-up financing costs due to the amount of interest.
Use time without provisioning interest
If your building loan expires in one year, you can make normal follow-up financing and secure low interest rates. In the non-provisioning period, when the old loan is still running, you can apply for follow-up funding, which will not be paid out immediately. Amortization and interest are due only when the loan amount is paid. How long the non-interest-free time takes depends on the provider.