February 2018

Who announces a loan ahead of schedule, the bank must pay compensation for lost interest. In determining the compensation, the banks but often expect their favor. can create previously clarity so save money.

The early redemption of loans with fixed interest rate will probably employ people until doomsday. In the past, there was a question whether the borrower can get out of the contract before the expiry of the fixed interest rate. Or involved the consideration of how the bank must calculate the compensation. Today is about the problem that capital market interest rates, the bank has to be used for the calculation of the prepayment penalty, and to consider how they must take into account the right to unscheduled. The two aspects are foreign to most private individuals. But this is about money. Therefore, it is useful to clarify the question of separation directly when taking pictures of the mortgage. This shows the following case.

Five years ago the bank paid out a loan of 300,000 euros. The nominal interest rate is 5 percent per year, and repayment was adjusted to 1 percent. The terms have been agreed for ten years so that the contract is valid for 60 months. The monthly payment for interest and principal is 1500 euros. The remaining debt is 282,998 euros. The open payment stream consists of 59 installments of 1,500 euros and the final installment of 262,679 euros. In the scheduled remaining debt of 261,179 euros is included.

Interest is not the same interest

When calculating the compensation, the outstanding cash flow is discounted. The rates are not, as was customary for some time, discounted at a single interest rate, but with 60 different interest rates. In technical terms, this method maturities discounted because the interest on the capital markets is not uniform, but depend on the investment period. For deposits with a maturity of one month, there is 3.6 percent, for example at the moment. For deposits with maturity of ten years currently, 4.25 percent be paid. According to the remaining amortization schedule is divided into 60 installments, and the individual payments are discounted at different rates. The difference between the sum of the present values of 60 and the remaining debt is the required compensation, amounting here to around 10,777 euros.

Behind this figure hides an average interest rate of 4.2 percent for all periods, and this mixed interest rate is now the central point of contention with credit detachments. Cause of some of the acrimonious disputes is the fact that in Germany there is no binding interest rate statistics, but trust each bank on their database. There are severe discrepancies. A look at the course pages of major newspapers shows that interest is not the same interest. Since there are government bonds and mortgage bonds, and the differences are 10 to 20 basis points.

Set the record straight

But there are also – and that was the trigger for a ruling by the Federal two years ago – the controversial Pex indices. The statistics of the Bundesbank is based on actual mortgage transactions in the stock market, but in the Pex also offers will be considered, for which there were no buyers. Therefore, the Pex yields are on average 10 basis points lower than the actual income from securities. These differences go on longer maturities powerful into the money because it is not indifferent to indicate whether open cash flows are discounted at 4.2 or 4 percent annually. In this case, the difference is just under 2,500 euros.

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