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Mortgages: Combo Loan

Part variable provide flexibility at moderate interest burden Berlin loan, 25.03.2011 – a variant of known annuity loan offering at the same time higher special repayment on favourable terms is the increasingly popular combo loan. This 50% of the loan amount as a special special repayment portion can be agreed up to a maximum, which can be repaid monthly in whole or in part. For this portion of the loan, the borrowing rate is based on the 3-month Euribor (EURO INTERBANK OFFERED RATE = interest rate for term deposits in the interbank market), while the rest of the loan (at least 50% of the loan amount) runs as a conventional annuity loan with long-term fixed-rate (min. 5 years). Because the EURIBOR is a variable size, so the possibility of interest rate cuts is to benefit. An adjustment of the interest rate takes place every 3 months. At all times, the borrower is able (E.g.

when rising interest rates), to convert the special repayment portion in a fixed part of loans with fixed interest rate. Who is advisable for a combo loan? With the agreement of Sondertilgungsmodalitaten, the borrower at the traditional annuity loans usually must reckon with a deterioration of conditions. But the flexible structure by means of far-reaching special repayment options for the real estate buyer is important (E.g., due to an expected inheritance, insurance benefits, etc.), the combined loan represents a low-cost alternative to the regular annuity loans. There, these options would usually is also priced. It also offers to participate in the part more flexible of interest rate the possibility of interest rate cuts. The “Flex”part can be converted in the opposite case, at any time to a regular long term-linked loans under the current conditions. What advantages and disadvantages poses a combination loan and what alternatives are there? In addition to the mentioned higher flexibility in the possibilities of redemption is the proportion of the ‘flexible’ loan part often not included in the Included in the total loan.

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