Reschedule your mortgage early: Your path to lower interest rates
7 Jun 2025
9
Minutes
Katrin Straub
CEO at nextsure
Your interest rates for the mortgage are high, but the fixed interest period still has years to go? Many borrowers are unaware that there are legal ways to refinance a mortgage early and significantly reduce the monthly burden. Discover your options to benefit from the current low interest rates.
The topic in brief and concise terms
After ten years, you can cancel your mortgage without additional costs, thanks to the special termination right (§ 489 BGB), by giving six months' notice.
Refinancing is often worthwhile with an interest rate difference of just zero point two percentage points, as the savings can be significant over the years.
The prepayment penalty demanded by the bank should always be reviewed, as it may be invalid due to BGH court rulings if contract clauses are unclear.
Early refinancing: When is an exit from the construction loan possible?
Refinancing a mortgage early means replacing an existing loan with a new one under better terms. This is usually possible without additional costs only after the agreed fixed interest period has expired. However, there are three essential exceptions that allow for an earlier refinancing. A reduction in interest rates of just zero point two percentage points can already justify refinancing.
The first and most important option is the statutory special termination right after ten years. Secondly, if you sell your property, you can often exit the contract, though you should anticipate an early repayment charge. The third option is the strategic use of a forward loan to secure today's interest rates for the future. These options open up ways to save thousands of euros over the remaining term.
Knowing the exact terms and deadlines is the first step to optimizing your financing.
Make use of the extraordinary termination right according to § 489 BGB for maximum flexibility
The Civil Code (BGB) offers borrowers a powerful tool with § 489. Regardless of your contractually agreed interest rate lock, you can terminate any construction loan after ten years. This period begins exactly one day after the full disbursement of the loan amount. For example, if you received the final installment on 15 May 2015, you can terminate from 16 May 2025.
A notice period of six months applies for termination. This means you submit the termination notice and can repay the remaining debt to the bank after six further months, without incurring an early repayment penalty. This right is available only to you as the borrower, not the bank. For follow-up financing or prolongations, the ten-year period even begins on the date of contract signing. A thorough review of your construction financing documents is crucial here.
This regulation provides a reliable planning basis for cost-effective refinancing.
Prepayment Penalty: Avoid Cost Traps When Refinancing
If you terminate before the fixed interest period ends and outside the ten-year window, the bank demands compensation for lost interest. This early repayment fee can quickly amount to several thousand euros. The bank calculates its loss by determining the difference between your contractual interest rate and the current rates for reinvestment in secure mortgage bonds.
However, the banks’ claims are not always accurate. The Federal Court of Justice (BGH) has strengthened consumer rights in several rulings. For example, the BGH decided on 3 December 2024 (Ref. XI ZR 75/23) that the entitlement to compensation ceases if the contractual terms for calculation are not clear and comprehensible for consumers. An incorrect cancellation policy in the original contract can also be a lever to avoid payment.
Our expert tip: Always have the calculation of the early repayment fee checked by an independent body. Even small errors in the calculation can reduce your costs by ten percent or more.
A thorough examination of the contract details is therefore essential to identify and avoid unnecessary costs.
Strategic Planning: Secure today's interest rates with a forward loan
A forward loan is an effective tool for securing current interest rates for future refinancing. You sign a loan agreement today, but the funds are not disbursed for up to 66 months. This is particularly beneficial if you are planning to restructure your debts in the coming years and anticipate rising interest rates.
For this interest rate security, banks charge a moderate interest premium. This premium increases with the length of the lead time (forward period). The advantage lies in having absolute certainty over your future monthly payment. You can calmly observe the current interest rate trend in construction as your rate is already fixed. The costs for changing the land register when rescheduling to a new bank are manageable, amounting to around 200 euros for a loan amount of 100,000 euros.
Deciding on a forward loan requires careful consideration of interest rate trends and your personal risk tolerance.
6 steps to successfully refinancing your mortgage
Thorough preparation is the key to successfully refinancing your mortgage. Keep track with the following guide:
Review contract documents: Determine the end of your fixed interest period and the deadline for the special termination right after ten years.
Determine outstanding debt: Ask your current bank for the exact amount of the outstanding debt at the desired refinancing date.
Compare offers: Obtain at least three alternative offers for new financing. Consider not only the interest rate but also options for special repayments.
Cost-benefit analysis: Compare the savings from the new lower interest rate against the costs (e.g., prepayment penalties, land registry fees). Refinancing often pays off with an interest rate difference of as little as 0.2%.
Cancel old loan: Submit the termination in writing and on time to your old bank. It’s best to use registered mail for this purpose.
Conclude new contract: Sign the new loan agreement and initiate the loan settlement. The new bank will transfer the outstanding debt directly to the old bank.
With this structured approach, you ensure the transition proceeds smoothly.
Expert Tips: How to Maximise Your Savings When Refinancing
In addition to the well-known methods, there are other levers to maximise the benefits of your debt restructuring. A frequently overlooked point is negotiating with your own bank. Present your advisor with a competing offer; sometimes, you receive better terms to keep you as a customer. This saves you the costs of switching banks.
Another important point is the precise analysis of total costs. Take into account all incurred fees, not just the obvious nominal interest rate. Here are some points you should check:
Special Repayment Rights: Can you make special repayments of at least five percent of the loan amount annually in the new agreement?
Repayment Rate Adjustment: Does the new contract allow for an adjustment of the repayment rate, for example, twice during the term?
Commitment Interest Charges: How long is the interest-free period if you don't fully draw down the loan immediately?
Account Management Fees: Does the new bank charge fees for the loan account?
Our Expert Tip: Check your old loan contract for formal errors, especially regarding the details for calculating early repayment compensation. A Federal Court of Justice ruling at the end of 2024 significantly increased the transparency requirements, providing you with a strong negotiating position.
The most crucial decision comes at the end of the process: choosing the right partner for your financing.
Request a personalised risk analysis now
The premature refinancing of your mortgage is a significant opportunity to sustainably improve your financial situation. However, the process also involves complexity and requires a thorough analysis of your personal situation and the legal framework. Professional advice protects you from costly mistakes and ensures you find the best possible solution for your needs. Have your insurance situation checked free of charge and receive concrete suggestions for optimisation.
More useful links
Wikipedia provides general information about property financing.
The Consumer Advice Centre answers frequently asked questions about property financing.
The Consumer Advice Centre provides information on the early repayment of a mortgage without additional costs.
The Consumer Advice Centre Schleswig-Holstein offers information on refinancing and follow-up financing of property loans.
Statista provides statistics on the development of construction interest rates in Germany.
Statista offers statistics on interest rates for housing loans to private households in Germany.
The Bundesbank publishes statistics on interest rates for housing loans to private households.
The Bundesbank provides data on interest rates for housing loans within the framework of the real estate market indicator system.
The Consumer Advice Centre informs how to reclaim improper fees during the refinancing of a construction loan.
FAQ
How can I refinance my mortgage early?
You have several options: the most cost-effective is to terminate after ten years in accordance with § 489 of the German Civil Code. Alternatively, you can refinance when selling a house, but you must pay an early repayment penalty. If your fixed interest period is about to expire, you can lock in the current interest rates with a forward loan.
Is refinancing always worthwhile?
No, refinancing is only worthwhile if the interest savings from the new loan exceed the associated costs (early repayment charges, fees). A general rule of thumb suggests that the switch can be worthwhile from an interest rate difference of zero point two percentage points.
What happens if I miss the notice period for the special right of termination?
The special right of termination according to § 489 BGB does not expire. You can terminate at any time, even after eleven, twelve, or more years, with six months' notice. Therefore, you do not have to hit an exact deadline.
Can the bank refuse a debt restructuring?
Your old bank cannot refuse termination after ten years. However, a new bank can decline your application for refinancing if your creditworthiness has deteriorated or the value of the property has fallen.
Do I need to go to a notary for a debt restructuring?
Yes, when you change banks, the mortgage must be transferred in the land register from the old bank to the new one. This requires notarisation and an entry by the land registry office.
Can I also refinance a KfW loan?
Yes, KfW loans can generally be rescheduled. However, an early repayment fee is also incurred here, and you must check the terms directly with KfW.
