What are the advantages and disadvantages of a forward loan?

Before you take out a forward loan, you should weigh the pros and cons. Because basically a forward loan is nothing more than an interest bet on rising interest rates. The forward loan is therefore only worthwhile if interest rates are low and the trend tends to increase: this is how you secure today’s low interest rates for tomorrow’s follow-up financing. This gives you planning security and saves financing costs thanks to the low interest rates. Another advantage: During the entire forward period – ie the time from the conclusion of the forward loan to the start of your follow-up financing.

You do not incur any commitment interest

You do not incur any commitment interest

On the other hand, if mortgage interest rates do not rise as expected, the forward loan can also become a disadvantage. Because the contract is binding: once you have concluded the forward loan, you are also bound to it. If you then do not accept the contract, you will have to pay non-acceptance compensation. The interest surcharge, which accrues for each month of waiting until your forward loan is drawn, can also have a disadvantage. The longer this waiting period, the higher the interest premium. If the construction interest rate does not develop as expected, it may well be that the agreed interest rate is higher than the current market interest rate.

To give you an overview of the pros and cons of a forward loan, we have put together the advantages and disadvantages for you:

To give you an overview of the pros and cons of a forward loan, we have put together the advantages and disadvantages for you:

  • You secure favorable interest rates for your follow-up financing up to five and a half years in advance
  • They rule out the risk of rising interest rates
  • You get planning security
  • You pay no commitment interest before taking out the loan

disadvantage

  • You also have to pay a premium on the building rate
  • You decide on an interest rate and a provider early on
  • You need to take out the forward loan even if interest rates have dropped in the meantime

To find out whether a forward loan is advantageous for you, a look at the current interest rate development helps. You can use our forward loan calculator to determine the expected interest rate.