We currently have an absolutely low interest rate phase in construction financing and everyone assumes that there can only be one direction in the future: upwards. Whether it will actually happen (and especially when), no one knows to predict. In the same way, it is impossible to predict whether we will end up in a high-interest phase again in the foreseeable future.
Anyone who is now taking out a new construction loan for the first time in order to buy or build a property should, however, remember that there were periods when interest rates were above 5 or 6 percent (in the early nineties even above ca. 9 percent). Who builds up its financing now in the belief that the low-interest phase lasts forever, takes a high risk.
How to protect yourself from rising interest rates later on?
- choose the longest possible debit interest rate lock-in period (preferably until the loan is repaid in full (= full repayment loan)
- agree on the highest possible repayment (min. 2 percent annually)
- use if necessary. Special repayment options
- secure your financing if necessary. by means of a building savings contract (which, however, is only really worthwhile in very special cases)!)
- save if necessary. on the side by means of investment funds o.a. Investments capital to repay their loans later in whole or in part (suitable for those who know about such investments)
Who chooses a debit interest rate fixation (fixed interest rate) until the end of the loan, currently pays approx. 1 percent more interest than the one who agrees only to a 10-year fixed rate. In return, however, you never have to worry about the interest rate conditions again and have complete planning security.
If you don't want such a long fixed interest rate, you shouldn't skimp on loan repayments. Standard is at least 2 percent repayment annually. Anyone who cannot (or does not want to) afford this in the long term should reconsider his or her financing wishes thoroughly. A relatively short fixed interest rate and low repayment can be a time bomb.
Hedging against rising interest rates by means of a home savings contract is at least worth considering under very specific (but also very individual) conditions. Above all, one should not forget the comparatively high savings rates and later loan installments.
Those who are involved in capital investments, especially stock and fund investments (o.ä.) will probably smile wearily in the face of low interest rates. Those who achieve a return that is higher than the effective interest rate of the loan can save capital over it and then, depending on the interest rate structure, bring it in later as a special payment.
If your financing is already in place, you also have some options to protect yourself from rising interest rates. It depends particularly on it, when the interest connection of your current loans ends.
If the fixed interest rate of your loan ends in 5 years at the latest, you can use a forward loan to secure the current favorable interest rates (incl. secure a slight interest surcharge). This is a good idea if you want planning security for the future and expect interest rates to rise until the end of your fixed-interest period.
If the fixed interest rate period of your loans runs longer than 5 years, you should if necessary. Take advantage of unscheduled repayment options or secure the remaining debt at maturity by means of a building savings contract.
With the special repayments remember that this is actually a kind of savings plan. Each special payment saves interest in the amount of your borrowing rate. For example, if your interest rate is 4 percent, you would need to find a very safe alternative investment that gives you -after tax- a return of 4 percent. This is more than unrealistic given the current interest rate market. So unscheduled repayments can be an optimal capital investment.
Financial and investment experts will focus on investments in, for example, stocks or mutual funds instead of special repayments. In the past, it was not that difficult to achieve a return that was higher than the borrowing rate, despite the occasional drop in the share price. Also who is not familiar with it, can of course so provide for and build up capital. However, he (she) should then have at least a bottle of valerian in the house.