
Debt restructuring: who benefits?
There are basically two options when the fixed interest rate expires after ten years. On the one hand, the borrower can decide to stay with their old bank and extend their existing loan agreement. This process is known as prolongation. On the other hand, the borrower can also decide to use follow-up financing to refinance the loan. In this case, they replace the existing loan with a new loan that offers them better terms. In most cases, the borrower also switches to another bank when refinancing. However, the loan can also be refinanced with the borrower's own bank.
When refinancing, you should pay close attention to the deadlines. Once you have found out when the current fixed interest rate ends, you must submit written notice of termination to your bank at least three months before the end of the fixed interest period. Once you have decided on a new bank, you must of course inform it of the exact date of the switch and conclude a new contract with it. The remaining debt on the old loan is then automatically replaced by the sum of the new mortgage.
If you want to terminate your existing loan with your current bank before the end of the fixed interest period in order to switch to another bank, you will have to pay a kind of penalty fee. This is because the old bank will lose income as a result. The fee is referred to as an early repayment penalty. In most cases, early debt restructuring is not worthwhile due to the amount of the penalty fee.
However, if you are considering refinancing after the fixed interest period expires, you may benefit greatly. You will have the opportunity to negotiate better terms and save money through lower interest rates. In any case, you should inform yourself well in advance about all offers and seek advice from an expert. If you show your old bank that you are well informed about all offers, it may make you an attractive offer for debt restructuring. In addition to commercial advisors, debt counseling centers can also help. In general, the higher the remaining debt, the more worthwhile it is to restructure it.
Finally, timely debt restructuring by switching to another bank always involves costs. If the debts are rewritten, the entry of the land charge must also be changed. This is known as a land charge transfer. This incurs notary fees, as only a notary can initiate this legal transaction. These notary fees amount to approximately 0.17 percent of the remaining debt. As a rule, your new bank will take the necessary formal steps.
Would you like to find out more about whether debt restructuring makes sense for your property? Contact us! We will be happy to advise you.