Pay thousands of euros more if you make this mistake

Two simple tips

These homeowners now save over 12,000 euros

Homeowners who need a new loan for their property can save thousands of euros with two simple tricks. We show how it’s done.

Anyone who took out a real estate loan ten years ago usually had to pay significantly less interest than they would have to today. It is now all the more important to keep the interest costs of follow-up financing as low as possible. Model calculations from the comparison portal Verivox show how homeowners can save over 12,000 euros on a new loan – with two simple tips:

In the model calculation, Verivox assumes a construction loan that was taken out ten years ago and is now pending follow-up financing. There is still a remaining debt of 260,000 euros. For the extension, i.e. for the continuation of the financing with the same bank, the previous credit institution offers the homeowners an interest rate of 3.48 percent. In the current market environment, this corresponds to a financing offer from the middle price segment.

In most cases, you can reduce your interest costs by switching to another bank for follow-up financing. “Even if the previous credit institution was cheap ten years ago, other providers are very likely to offer better conditions in the current market environment,” says Verivox managing director Oliver Maier.

The pricing of the individual banks always depends on their current business policy and varies occasionally. “Anyone who wants to fill their loan books in the short term can position themselves in the market with particularly low interest rates.”

The financing expert points out another advantage that switching banks brings with it from the customer’s perspective: “In contrast to the old bank, a new credit institution will always re-evaluate the property for its terms and conditions. Due to the significant increase in property prices in recent years, this often has a positive effect on interest rates.”

According to data from the Federal Statistical Office, prices for owner-occupied residential property have risen by an average of around 67 percent over the past ten years. In order to take into account the simultaneous loss of value due to aging, Verivox only uses a 47 percent increase in value in the model calculation. Instead of 400,000 euros like ten years ago, the property is now worth 588,000 euros. Homeowners benefit from this when it comes to the interest rate for their follow-up financing.

This is due to the so-called loan-to-value ratio. “Anyone who takes out less than 60 percent of the property value as a loan benefits from particularly attractive interest rates from many banks,” explains Maier. Without the increase in value, this limit would not be fallen below. But after the revaluation, the loan amount for follow-up financing is only 44 percent of the current property value.