Debt rescheduling is tempting when building rates are very cheap. If the builder wants to reschedule his building loan while the interest rate is fixed, he needs the approval of the bank. Most of the time banks agree to rescheduling their debt, which can be rewarded with a hefty prepayment penalty.
It should be pointed out that the bank does not have to agree to rescheduling. The borrower is contractually bound to the building loan for the duration of the fixed interest period. Approval gives the bank the right to dictate the terms of the debt restructuring. The conditions for debt rescheduling mostly include a prepayment penalty. Banks also insist on debt restructuring themselves. The building loan remains with the same bank.For the customer, only the interest conditions change after the debt rescheduling. Debt rescheduling to another bank is rarely possible.
If the debt is rescheduled while the rate is fixed, the bank can insist on a prepayment penalty. The prepayment penalty is intended to replace the loss of profit for the bank. Banks usually calculate the prepayment penalty incorrectly. If the same bank carries out the debt rescheduling, it may only calculate the loss of profit. But not the lost interest!
Received twice with debt rescheduling
If a bank carries out the debt rescheduling during the fixed interest rate, it can only calculate the difference in profits from the old to the new building loan. Often this does not happen. Banks like to calculate the full loss of profit until the end of the first fixed interest rate. As a result, banks cash in twice with debt restructuring. On the one hand, they collect the prepaymentpenalty in full until the end of the first fixed interest rate. On the other hand, the bank is earning money from the debt rescheduling of the new building loan. The bank therefore pays twice for the remaining term of the first fixed interest rate. This calculation would only be correct if the client sold his property or rescheduled to another bank.For this reason, banks are happy to agree to rescheduling.
Building loan tip debt restructuring
Debt rescheduling is generally not advisable. The bank does not have to agree to rescheduling. Furthermore, the prepayment penalty often makes rescheduling uneconomical. The cost of debt restructuring is usually far too high. The client is also dependent on the goodwill of the bank. If rescheduling pays off economically during fixed interest rates, make sure that the prepayment penalty is calculated correctly. However, if the builder is only able to get a cheaper building loan for his building loan, there is also the option of a forward loan. This enables the builder to secure a favorable building rate for the future and avoids the problem of debt restructuring.