In the most common form of real estate financing, the annuity loan, special payments shorten the loan period until it is fully repaid. Due to the interest portion of the monthly installment calculated on the basis of the falling residual debt, the repayment rate increases and the real estate loan is released earlier than planned. But above all with regard to the remaining debt at the end of the fixed interest period, exhausting contractual repayment options can contribute to a significant reduction.
Furthermore, an option with high special repayments is advisable if it is foreseeable that you want to sell the property again before the end of the loan term. The loan can then be redeemed from the sales proceeds – ideally without prepayment penalty if this has been agreed in advance.
Provide loan agreement
If it is already foreseeable when the financing is concluded that larger amounts of money will be released again and again during the term, which should contribute to the early repayment, this should be provided for in the loan agreement. Most banks offer free special repayments of up to five percent annually. Higher repayment options generally make the loan interest more expensive and should therefore be calculated meticulously and wisely. In addition, not all banks offer such flexible contract arrangements. Larger banks in particular are not dependent on this, so that rather smaller institutions are more open to individual requests.
In the case of relatively secure cash receipts, a form of credit that deviates from the annuity loan, for example a variable loan, may also be recommended. It is also possible to split the total loan into two different types of credit.
Loan repayment rate
An option that allows the repayment rate to be changed free of charge during the term – for example from 2 to 3 percent – is a sensible alternative if, instead of larger one-off payments, an expected increase in income ensures consistently higher liquidity.
Special repayment agreements that go beyond a period of ten years do not make sense, since after ten years there is a right of termination anyway and credit institutions can only request a prepayment penalty within this time.
For building society savers – that is, if the building financing was made through a building society – special repayments are possible at any time and in any amount.