Save almost 10,000 euros: For these homeowners, changing banks is worth it

Follow-up financing

For many homeowners it is now becoming significantly more expensive

Many real estate loans from the low interest rate phase will soon expire. The new rate of follow-up financing can be significantly higher, but a comparison can save a lot of money.

Owners who financed a property in 2016 will be faced with an unpleasant bill in the coming months: the interest rates on building loans are significantly higher today than they were back then. If the ten-year fixed interest rate expires, Follow-up financing can significantly increase the monthly burdenlike a model calculation from the comparison portal Verivox shows that t-online has available in advance.

Accordingly, the rate for a typical real estate loan increases by almost 400 euros per month. At the same time, borrowers can save almost 10,000 euros in interest costs by switching banks.

In the example calculation, a construction loan for 340,000 euros was taken out in September 2016. The financing was designed so that the property would be fully paid off after 35 years. At that time, the loan with a ten-year fixed interest rate had an interest rate of 1.14 percent. The monthly rate was 982 euros.

Today the situation looks different. For the extension of the loan with the previous bank – the so-called prolongation – Verivox applies an interest rate of 4.09 percent in the invoice. According to the portal, this corresponds to a current offer from the mid-price segment. If the total term of the financing remains unchanged, the monthly rate increases to around 1,365 euros. That’s 383 euros more than before.

“Many property owners whose fixed interest rates are due to expire in the near future have to be prepared for a significantly higher monthly burden when it comes to their follow-up financing,” says Verivox managing director Oliver Maier. Borrowers should therefore not accept the offer from the previous bank without checking it.

The follow-up financing that is now pending is probably just the beginning. According to data from the real estate financing platform Europace, almost every second building loan from 2016 had a fixed interest rate of ten years. A corresponding number of owners now have to extend or refinance their loans at significantly higher conditions.

The number of affected households could continue to rise in the coming years. The volume of completed construction financing increased significantly by 2021. According to Verivox, 21 percent more construction loans were taken out in 2021 than in 2016. Many of these loans also come from a time of very low interest rates.

Despite the increased interest rates, comparing different offers can pay off significantly. In the Verivox calculation, switching to a cheaper bank results in a saving of 9,930 euros in interest costs.

This means that the loan amount still required is lower in relation to the property value. This is important for banks: those who have to finance less than 60 percent of the property value often receive better conditions. In the example calculation, a follow-up loan at 3.67 percent would be possible from a cheap bank – well below the offer from the previous bank.