The conclusion of a forward loan has many advantages – but above all, it can be used to secure long-term interest rates if you want to continue financing an expiring construction loan. This gives the borrower security but also takes some risks.
Experts recommend every borrower to look into a forward loan at least three years before the fixed interest period expires. Because it offers the opportunity to secure attractive interest for future follow-up financing at an early stage.
Interest rates are generally quite low at the moment – but are there any disadvantages here? Of course, even experienced financial experts cannot predict 100% how interest rates will develop over the next few years. Therefore, as a borrower, you always take a certain risk – because if interest rates fall even further, you have wasted money unnecessarily. It is therefore important to weigh up the advantages and disadvantages as carefully as possible and compare different offers before you prematurely sign a contract with a bank. An independent financial advisor can also be a good help.
When does a forward loan have to be taken out?
Borrowers need to be aware that a forward loan must also be taken out if interest rates should go down in the meantime. So if you sign a loan agreement, you commit to accepting this loan. However, according to German law, there is of course still 14 days to cancel a contract – this also applies to loan contracts.
Should the interest rate decrease further until the forward loan is actually drawn down and you no longer want to take out the loan as a result, most banks still grant a withdrawal. However, one must then expect to have to pay a kind of compensation – here one speaks of the so-called non-acceptance compensation as cost compensation. It can best be compared to a prepayment penalty for ongoing loans.
We, therefore, recommend: Before you hastily decide on a forward loan, you should get a good overview of the current interest rates on the financial market. This makes it easier to assess whether an offer is cheap or not. A reliable indicator here is, among other things, the current yield on Friendly Lender at the National Bank. If this increases, building rates will most likely rise in the coming months. It is important to keep an eye on the course over several months in order to recognize trends.
Of course, the individual’s life situation should also play a role. If you are in a financially stable position, a forward loan is certainly not a mistake. However, if you plan to spend more in the near future or would like to resell your property, follow-up financing is a hindrance. Because of the current building loan has not yet ended, but a contract for a forward loan has already been concluded, both the non-acceptance fee and the early repayment fee are incurred – and that is not cheap.
The non-acceptance compensation – this is how it is calculated
The non-acceptance compensation refers to a type of compensation that the borrower has to pay to the bank if the building finance is not to be used after the objection period has ended. Because as soon as a contract is signed for a forward loan, you are obliged to ensure that the loan is also taken at the contractually agreed time.
However, if this does not happen, it is common for the bank to demand non-acceptance compensation. Because, of course, the lender has already incurred costs and will miss out on planned interest income. Therefore, the non-acceptance compensation comes close to a classic prepayment penalty.
When can the bank claim non-purchase compensation?
There are several cases in which a bank can request non-payment compensation from its customer.
The first option is that the customer does not want to continue building construction that has already been completed. This is the case, for example, when a borrower finds a better offer somewhere else and therefore wants to make a change. In the first 14 days after the conclusion of the contract, the revocation is not a problem – however, the bank can then claim non-acceptance compensation.
It also happens that the borrower miscalculates when calculating a forward loan. You have the option of securing favorable interest rates for follow-up financing five years in advance – but the loan must then also be accepted. If you withdraw from the loan agreement because interest rates have decreased further or you no longer need a loan for personal reasons, you will also have to pay compensation from the bank.
There is also the case that the borrower has not exhausted his previous loan. Anyone who has taken out a higher loan amount than they actually needed and therefore can no longer take the remaining amount must also expect non-payment compensation.
The bank can use two methods to calculate the non-purchase compensation: There are both the active-active method and the active-passive method, which is used more frequently. This is because the current interest rates for mortgage Friendly Lender serve as the basis for the calculation. This can then be used to calculate the return that the mortgage Pfandbrief would have achieved with the same term. This return is then compared with the interest lost to the bank from the initial financing – the difference then results in the non-acceptance fee to be paid by the customer. The following always applies: the higher the difference, the higher the non-acceptance compensation.
The active-active math mode is used less frequently, in which the bank assumes that the money from the loan, which is not used by the borrower, can be used by other customers. The non-acceptance fee is calculated here from the amount of the interest on the loan not taken and the average interest rate of current construction loans on the market.
In addition to the non-acceptance fee, most banks also incur a processing fee – the amount is determined individually by each bank.
In this way, borrowers can avoid non-acceptance compensation
Some exceptions allow borrowers to receive no non-acceptance compensation if they do not take out a loan. For example, fees do not apply if the borrower decides against the loan within the first 14 days after signing the contract. There is also the possibility of incorrect cancellation instructions: If the bank has given its customer wrong or not at all, no compensation will be charged.
Formal errors in the contract or withholding important information such as deadlines and rights also entitle the customer to not have to pay non-acceptance compensation. Otherwise, you can not avoid paying the costs.
Why it makes sense to take care of a forward loan early on
It is highly recommended for borrowers to take care of follow-up financing as early as possible. If you only start looking for suitable follow-up financing a few weeks before the end of the fixed interest period, you will quickly find yourself under pressure and may take advantage of offers that are not as cheap as initially thought.
In addition, the development of interest rates on the financial market must always be observed: If borrowers assume that interest rates will increase in the near future, it is advisable to take out a forward loan as soon as possible. It is not uncommon for the interest rate to change weekly, which is why you should not wait too long to conclude it.
Why comparison of different forward loans is so important
There is now a large selection of banks and credit institutions in Germany that offer a wide variety of forward loans. Since the offers can differ greatly from one another, particularly with regard to their conditions, a careful comparison in advance is absolutely necessary. Under certain circumstances, there is even an inexpensive offer on the Internet: Many direct banks offer significantly more favorable conditions than branch banks since they have no branches and can therefore also offer lower interest rates.
However, each borrower has to decide for himself whether a personal contact person on site is important to him. In addition, attention should not be paid exclusively to the interest rate – the other conditions are at least as important, including the amount of a possible non-acceptance fee. It is calculated individually by each bank – there can be big differences here, too. A loan comparison can then be used to find the lender with the best conditions.