The debt rescheduling of a loan should be considered carefully, because depending on the initial situation and the loan agreement, costs may be incurred which are not insignificant and melt away the financial advantage of the lower interest rates of the new loan. The costs of the debt restructuring are different and are influenced by different factors: the amount of the prepayment penalty, notary fees, administration fees and land registry costs.
The notary fees depend on the amount of the land charge and are usually 0.5%.
Notary fees are incurred when a land charge is assigned to the new lender, a partial deletion or partial assignment of the old land charge takes place or a new land charge is entered in favor of the new lender. For example, if the land charge amounts to 250,000 dollars, the notary fees (including land registry costs) would be around 700 dollars.
Notary fees apply to:
– the rescheduling of an expired loan
– Debt restructuring after the end of the fixed interest period
– Forward loan before the end of the fixed interest period
– Debt restructuring before the interest rate fixation period expires
Debt Rescheduling Compensation
The bank requires prepayment penalty because it has raised itself the capital necessary to pay off the loan for exactly the same duration of the current loan agreement – if the borrower repays the debt earlier than planned, the bank will incur losses – she would like to compensate for this with the prepayment penalty.
In principle, the prepayment penalty is calculated separately or individually by each bank. According to the BGH judgment, the banks are allowed a premium of up to 100% – accordingly, the costs that the borrower has to pay if the loan is rescheduled to the bank can amount to between 5 and 10 percent of the loan amount.
Land register costs
The land register costs, like the costs for the notary, depend on the amount of the land charge and are incurred if the land charge is deleted in whole or in part, is newly registered or transferred.
Some banks charge processing fees for a debt rescheduling because the property decision is costly for the financing decision. However, not all banks charge these fees, and as a rule the costs are kept within reasonable limits.