Forward loans & follow-up financing
After the end of the fixed interest rate, it is important to find a follow-up financing with the favorable conditions. This is where the forward loan comes into play.
by BayHyp |
A forward loan is, in a sense, a "bet" on rising interest rates. This type of a loan takes effect after the end of the motgage commitment. You can set a follow-up financing up to five years in advance and thus secure the low interest rate level of your previous mortgage. It therefore offers you a certain degree of security. However, a deal is only worthwhile if you expect interest rates to rise in the future. If, on the other hand, the interest rate level drops, then a forward loan would not have been worthwhile for you, because then your loan interest rate would be above the general interest rate level. However, it must also be taken into account that the banks charge an interest rate premium on this form of loan. Its amoun increases with the duration of the lead time.