A forward loan is primarily used to secure favorable conditions for follow-up financing. Most banks offer the loan up to 60 months in advance. Holders of real estate financing whose mortgage expires within the next 5 years can use the currently favorable conditions for follow-up financing. The loan is taken out at the current interest rates and then paid out within a period of up to five years. The banks charge a certain surcharge for this.
Secure low interest rates in good time
In any case, it is worth taking care of the follow-up financing in good time before the interest rate lock expires. This is especially true when interest rates are at a low level. If interest rates are low, it must of course be expected that they will rise again in the near future. Depending on the forecast, the markups that the bank charges for the loan are also based. If a stronger increase is expected, the surcharge will also be higher. Forward loans are currently being offered on very favorable terms. As a result, banks do not expect interest rates to rise. Strictly speaking, a forward loan is most worthwhile if the conditions for it are rather unfavorable. In this case, it can be assumed that interest rates will develop rather unfavorably in the future.
Compare forward loans
Before deciding to take a forward loan, borrowers should compare the existing offers closely. In addition, interest rate developments in recent years should be closely monitored, for example to estimate how interest rates will develop in the future. On the Internet there are special forward calculators with which borrowers can calculate how interest rates should develop so that the forward loan is worthwhile and that they can get cheap construction money. For example, if the regular interest rate is 3.0 percent and 3.5 percent is required for a forward loan with a lead time of 36 months, the forward loan would always be worthwhile if the interest rate in these 3 years decreased by at least 0.5 percentage points increased. If the borrower assumes this, then he should choose the forward loan. Otherwise it would be worth waiting a little longer. In principle, a forward loan is a bet on how interest rates will develop in the near future.