Follow-Up Financing

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The Most Important Facts About Follow-Up Financing in Brief

If the fixed interest rate period of your mortgage expires and there is still an outstanding balance, you will need follow-up financing.

The options for follow-up financing include refinancing, an extension (prolongation), or a forward loan.

The right type of follow-up financing for you depends on your preferences and the current interest rate level.

Follow-up financing gives you, as a borrower, the opportunity to adjust the loan to your current income and life situation, helping you secure a suitable loan with an attractive fixed interest rate.

What Is Follow-Up Financing?

Owning a home is expensive. While interest rates have dropped significantly in recent years, property prices and construction costs have risen sharply. As a result, it typically takes 20 to 30 years for home buyers to fully repay their mortgage, including interest.

Most borrowers choose a fixed interest rate period of 5 to 15 years. When this period ends, there is usually an outstanding balance that requires further financing. For this so-called follow-up financing, banks offer various solutions.

Prolongation as Follow-Up Financing

Prolongation means the continuation of an existing contract. You keep your mortgage with your current bank under the same terms, renegotiating only the interest rate and the fixed interest period. Here's how it works:

At least three months before the fixed interest rate period expires, your bank will inform you whether it is willing to extend your mortgage.

Typically, the bank will offer you a prolongation and provide details on the new interest rate and the proposed fixed interest period for the continued financing.

If you wish to accept the offer, you simply sign and return it.

After the fixed interest period ends, your mortgage will continue under the new terms.

Prolongation as Follow-Up Financing

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Disadvantages

Follow-Up Financing Through Refinancing

With refinancing, you transfer your mortgage to another bank. You apply for a new mortgage equivalent to the remaining debt and specify "refinancing" as the purpose. After signing the necessary documents, the new lender transfers the loan amount to your previous bank, settling your outstanding debt. You then repay the remaining balance through the new mortgage.

Refinancing as a form of follow-up financing usually offers lower interest rates. It also allows you to renegotiate the terms set in your previous loan agreement. If desired, you can adjust key aspects such as installment amount, repayment rate, fixed interest period, or special repayments to better suit your current financial situation.

Follow-Up Financing Through Refinancing

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Disadvantages

Forward Loan as Follow-Up Financing

With a forward loan, homeowners secure the terms for their follow-up financing well in advance. It is possible to plan follow-up financing up to five years before the end of the fixed interest period. The forward loan allows you to agree on follow-up financing for your mortgage in the future, locking in the current interest rate with a small premium.

Given the current interest rate trends, longer interest rate periods are generally more suitable for you. This ensures that the terms of your follow-up financing are fixed, and you know exactly what your future payments will be. Once the fixed interest period for your current mortgage ends, the new bank settles the remaining debt on time, and you will begin repaying the follow-up financing.

Forward Loan as Follow-Up Financing

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Disadvantages

Which Documents Are Required for Follow-Up Financing?

If you continue your mortgage with your old bank through prolongation, no new documents are required, as your bank already has all the necessary information.

However, if you are considering refinancing or a forward loan, the following documents must be submitted along with your loan application:

Proof of income (usually pay slips from the last three months)
Floor plan of the property for which you are seeking financing
Land registry map (site plan)
Construction documents
Current land register extract (not older than twelve months)

What to Consider for Follow-Up Financing?

The earlier you plan your follow-up financing, the better. Keep an eye on the financing market during your fixed interest period and regularly check interest rates. This will make it easier to assess which conditions are favorable and how interest rates will develop.

A forward loan is the right choice if you prefer a high level of planning security and anticipate rising interest rates.

If you're considering refinancing for your follow-up financing, wait for the offer for prolongation.
Check this offer to see if another bank offers better conditions for your financing.
Refinancing is also an option for follow-up financing if you want to redefine the terms of your mortgage.

Want to find out more about Follow-Up Financing?

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