Forward loan interest rate | Term credit interest rate
The actual interest rate remains unchanged throughout the term of the term loan. Therefore, the interest rate on a term loan is usually slightly higher than the current interest rate. Often, a forward loan came into play, setting an interest rate that will only take effect in the future. In the case of a term loan, the “interest rate risk” is transferred from the borrower to a bank, building society or insurance company. Term loans can also become property owners for the future as interest rates are historically low.
Term credit –
A term loan is an annuity loan on fixed terms that is only used subsequently, usually years after conclusion of the contract. In the case of a term loan, the “interest rate risk” is transferred by the borrower to a house bank, a building society or an insurance company. Interest rates have fallen sharply in recent years, and almost anyone with a fixed rate today can now expand their lending to lower rates.
The aim is to guarantee an objectively favorable interest rate on an annuity loan, since a higher interest rate occurs at the grant date of the loan. This fixed rate is bought with an interest premium that should not exceed the expected increase. A forward loan can be issued up to sixty months in advance.
Term loans are generally used for the follow-up financing of real estate. Since it is known when the fixed interest period expires and how much of the remaining loan amount will be at this point, this option is obvious. In the case of favorable interest rates or expected interest rate increases, an interest advantage and an early disposition security are possible.
If your fixed interest period ends in the next 12 months,
You can choose a classic follow-up financing. However, if your fixed interest period expires in one to five years, today, a term loan gives you the opportunity to enter into a contract with a new fixed interest period to receive today’s favorable interest rates.
This new credit agreement must then be respected by both parties for the new agreed fixed rate, even if interest rates were still below today’s levels. Early and immediate interest savings a real opportunity versus forward loans? For existing mortgages, the interest rate is usually lower than the current market interest rate. If you want to terminate your “old” loan agreement early, you can sing at your house bank and look to goodwill.
BayernLB is only subject to the termination of a loan agreement in exceptional cases. In this case, it happens in individual cases that the customer concludes the following contract with your house bank, insurance company or home loan saver instead of a term loan.
Let’s say the fixed rate period for your loan is about 3 years. But you do not want to wait another 3 years longer for me and immediately secure the interest. Your house bank, insurance company or housing company will grant your loan early by 10 years at an interest rate that is significantly higher than the current market interest rate at a fixed interest rate of 10 years, but also significantly lower than the interest rate you set 7 years ago.
The prepayment penalty is quasi included in the new interest rate, and you pay the prepayment penalty in installments over 10 years over the increased interest rate.