If the financing of your own home is sewn on edge, things can get tight with persistently high inflation and rising interest rates. If you get into trouble, you should start talking early.
There are many reasons why homeowners can no longer pay their loan installments. But the solution is always the same: seek dialogue with the bank. Burying your head in the sand out of shame would definitely be the wrong approach.
Because if installments are not paid or reduced, the loan is terminated after a reminder, followed by court proceedings and finally the foreclosure sale. This must be avoided in order to save the property.
An honest checkout often helps. “With the monthly expenses, there are often reserves that appear small at first glance, but in the end can help to keep the rate,” says Roland Stecher, real estate expert at the consumer advice center in Bremen. This can be streaming services, unused memberships in clubs or expensive mobile phone contracts. If you do without it, you save money that you can put into real estate financing.
It is also possible to make savings plans or life insurance policies non-contributory for a while. “However, you shouldn’t save on essential things, but give yourself air to breathe,” advises Stecher. “Otherwise you just delay the process.”
If your own reserves are not sufficient to plug the hole, contact with the bank is unavoidable. This should be done as early as possible, not just when the installment can no longer be paid.
“The customer notices much more than the bank when he gets into trouble,” says Dirk Stein, a real estate expert at the Association of German Banks in Berlin. “Then it is advisable to discuss how big the bottleneck is and how long it is likely to last. In the vast majority of cases, a way can be found.”
For example, it is possible to reduce the repayment rate. According to Stein, many builders repay at rates of between three and five percent because of the low interest rates at the time of conclusion. “If you reduce the repayment rates to one percent, for example, that brings a noticeable relief.” In the case of larger payment defaults, the repayment can even be temporarily suspended completely, in which case the customer only has to pay the interest.
In principle, the customer has no right to a reduction or suspension of repayment, but it is worth negotiating with the bank. “It’s good if it was agreed from the beginning when the contract was drafted that the repayment installments can be changed during the term,” says Roland Stecher. But even if this passage is missing, the banks are generally willing to talk because they too are interested in the full repayment of the loan.
However, if the customer does not transfer his installments, this has serious consequences. “If the consumer is completely or partially in arrears with at least two consecutive installments and the total arrears are at least 2.5 percent of the loan amount, the bank has the right to make the real estate loan due in full,” says Holger Freitag, legal counsel of the Association of Private Builders in Berlin.
“So she can demand payment of the entire outstanding amount at once.” In order to give the consumer one last chance, the bank has to set a two-week deadline. And she has to offer him a conversation about how to get the cow off the ice.
If it is not possible to get the further financing of the loan on its feet, the builder will have to say goodbye to his property for better or worse. “But that’s the absolute exception,” says Dirk Stein.
In such a case, it is important to avoid foreclosure of the property as far as possible. “Neither the bank nor the customer are interested in foreclosure,” says Stein. Apart from the low proceeds and the additional costs for the legal proceedings, the customer also gets negative Schufa entries. Anyone who has ever gone through foreclosure will not get a real estate loan again that quickly, even if their income situation improves noticeably.
To avoid foreclosure, you can agree with the bank to sell the property yourself. Here, too, cooperation is called for: “The bank is always on board with private sales, because the consumer can only sell the property with the land charge,” says Holger Freitag.
If the consumer does not cooperate sufficiently from the bank’s point of view, it will make use of its security and liquidate the land charge. “It then boils down to the property being foreclosed on,” says the lawyer. This may take longer and the bank must pre-finance the procedure. “That’s also why the foreclosure auction is usually the last step.”
In difficult times, it pays off if the real estate loan is solidly financed and flexible right from the start. Because during the long term payment problems can arise again and again. “Then it’s the be-all and end-all to talk to the bank,” says Dirk Stein. “Because both sides have an interest in keeping the loan alive to the end.”
