The fixed-interest phase of your loan is slowly coming to its end, but you still have residual debt and are not sure which model to choose to pay it off? What options you have in such a follow-up financing, we explain in this post.
What is meant by follow-up financing?
Generally speaking, this is a type of financing that allows you to repay debts that continue beyond the end of the fixed-interest period of your loan. Two variants can be distinguished: Rollover and rescheduling . What the differences are? We'll explain it to you below!
What is a rollover?
When you roll over (extend) your loan, you accept an offer from your existing lender to finance the remaining balance. You sign again an interest agreement and your current loan is continued with changed conditions. Normally, banks present such an offer to their customers before the fixed interest period expires. But beware: while it takes minimal effort for you to simply extend the existing loan. If you compare several options, however, you'll quickly realize that your bank's terms aren't the most favorable. So look around for alternatives in any case! We at miracl help you with this!
What is a debt restructuring?
Unlike a rollover, a debt restructuring involves replacing your existing loan with one from a different provider. The latter replaces the current financing at the end of the fixed-interest period and in return receives the maximum amount mortgage on the property, which serves as collateral for him. Even if a debt restructuring involves land registry fees, certification costs and – depending on the loan agreement – penalties, it can be worthwhile even if the interest savings are in the tenths of a percent range.
How do rollover and rescheduling work??
Execution of a rollover
Usually, your bank will present you with a corresponding offer three months before your housing loan expires. Alternatively, you can apply for this yourself a few months before the end of the fixed-rate period. If you agree to the conditions, then you do not have to do anything other than sign a new loan agreement. In this, the interest rate and term are set again, the repayment can also be adjusted.
carrying out a debt restructuring
As we have seen, in case of debt restructuring you change the credit institution. For this, the following documents must be submitted to the new bank:
- Proof of income (income statement as well as salary slips from the last three months)
- Land register extract
- documents about the property as such
- Evidence of planned and completed redevelopment
- Credit agreement with the previous bank
- Confirmation of the remaining debt at the redemption date
Once the contract with the new provider is signed, the new provider will clarify the remaining formalities with the previous lender. You yourself do not have to do anything else
Pro and contra prolongation
The pro is already in the name here – so everything should speak for the extension of your existing credit, or? Not quite. The advantages of the prolongation lie in particular in the uncomplicated execution: The documents necessary for the real estate financing do not have to be submitted again and no further proofs must be furnished. After signing the new contract you do not have to take any further steps. Conversely, if you roll over, you also lose the opportunity to get more attractive terms on the follow-up financing. Because as a borrower you have relatively little room for negotiation in most cases.
Pros and cons of debt restructuring
Debt restructuring, on the other hand, has the advantage that you can change credit institutions and compare credit offers to obtain more favorable conditions. In addition, you can often save costs and not infrequently get rid of your debt faster than with a rollover. What you save in money, however, you have to invest in time: Debt rescheduling involves more bureaucracy and requires more initiative on your part as a consumer. In addition, there are some costs to consider here as well: such as the cost of paying off the maximum price mortgage by the new lender, as well as any penalty fees.
Which variant suits me?
Since this question depends on numerous factors that vary greatly from borrower to borrower, it is hard to give a blanket answer. To find out whether you are more of a rescheduling type or a rollover type, it is best to talk to an advisor who has experience in this area. Then it's definitely easy for you to make the right decision.