What is interest subsidy

Peter Ostrich Consulting

Special repayments are repayments that exceed the payment installments agreed in the loan agreement. Special repayments are possible at any time for building society loans from building societies. In the commercial sector or at the other credit institutions, they can only be made with their consent, in which case a prepayment penalty and an interest adjustment are usually charged. More and more banks are starting to agree on special repayments in loan agreements or the general terms and conditions. Maximum limits are set for the special repayment (for example 5% of the original loan amount per year or a maximum of 50% of the loan amount during the fixed interest period). With special repayments, the total term of the loan can be shortened or the regular loan installments can be reduced. Particularly with a longer fixed interest rate, the option of a larger special repayment is seldom given because it is not worthwhile from the bank's point of view. As a borrower, according to Section 489 I No. 3 BGB, after ten years you have the right to terminate your construction loan with a notice period of six months and to repay part or all of it. But if you unexpectedly come into possession of a large sum of money, e.g. For example, through an inheritance or if you want to “invest” your profits in a larger special repayment, you are of course much better off with a shorter fixed interest rate. Programs from public funding programs of the state and federal funding agencies, which offer free special repayments in these programs, help here. Such conditions are of course a big plus for loans because they allow the borrower greater financial flexibility at no extra charge. For example, early full or partial unscheduled repayment of the outstanding loan amount is permitted in the various programs during the first fixed interest period. A vote on the accompanying credit institution does not necessarily have to take place.