Right to special repayment, provision interest and prepayment penalty

In this case, in addition to the usual repayment installments, you can also make special payments. Thus, you shorten the overall term of your loan. This has the advantage that you reduce the total interest burden of a mortgage. Another cost factor that is often overlooked is provision interest. These occur when you loan is available, but you are not ready to use it. Lenders then charge this form of interest as a kind of "compensation payment" for having provided you with the agreed sum of money but not yet being able to make a profit from it. Because if you do not use the provided loan amount, no interest will be charged. So the loan is like "dead capital" for the bank, which yields nothing. For this reason, there is provision interest. In which cases can this interest be charged? Suppose you have your mortgage arranged, but there are disagreements in the negotiations between you and the seller of a property. In such a case, some time may pass before the loan is actually called up. Normally, however, you will be granted a provision interest-free period of about six to twelve months. After this period, the provision interest will then be charged. Here it is important to inform yourself in advance how high the provision interest is and how long the provision interest-free period is. As a rule, the provision interest rates are above the regular interest rate of your loan. Therefore, it is worth taking a closer look at this topic in advance. Attention should also be paid to a possible pre-payment penalty. If, for some reason, you want to re-pay your home loan early, then a prepayment penalty will apply. Similar to the provision interest, this compensation payment also acts as a kind of "compensation". However, there are limits set by the EU: With a remaining term of more than one year, the prepayment penalty may not exceed 1 % of the remaining debt. Under one year, the maximum value is 0.5 % of the remaining debt.