Mortgage extension for non-resident

15 posts in this topic

I took out a mortgate on a neubau purchased in November 2014, at the time I was a resident in Germany.  I left in 2016.

 

Due to me being a freelancer, I was offered a relatively short-term mortgate of 10 years (fixed rate, from Commerzbank), so it terminates in November 2024.

 

As I would plan to sell the property in 2025 (to avoid the taxes) I am concerned about the mortgate expiring.  When I last spoke to the bank manager he said that I would be offered an extension automatically in the year before it ends.  However, what I dont want to take on is another long term fixed rate one, as then I would have the pay a large fee to terminate early when I sell it.  Im assuming however, that I wont be able to shop around for an alternative as I wont be a resident.

 

Does anyone have any information or experience in such a situation?  Or if you know of companies that specilise in providing mortgages to non-residents, then that would also be useful.

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At the current level of interest rates I wouldn´t be too worried about taking out a longer term one. Firstly, it´s unlikely that rates will be even lower in 2024 (which means any prepayment penalty will be low or even zero) and secondly, whoever buys your property might be happy to be able to take it over from you (assuming rates won´t be even lower by then).

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I took two mortgages spread over 4 apartments in 2008 with interest fixed for 15 years at about 5.4%. Back then it seemed like a good idea to lock such a low interest rate.

 

I renegotiated them at the start of 2019 while no longer resident in Germany. Interest is now less than 2% although I've ramped Tilgung up to 7% so I'm actually paying more monthly.

 

As the property values have more than doubled I enquired about increasing the mortgage, and also offered one of the mortgage companies to take on the other mortgage. None of this was possible as I wasn't German resident. But I was easily able to renegotiate the interest, and there was no suggestion of terminating my mortgage.

 

BTW The interest renegotiation went like this:

 

Me: Mortgage number xyz

Bank: What can we do for you?

Me: I'm paying too much interest

Bank: Talked for next 5 minutes making me an offer I couldn't refuse. 

 

I never expected the conversation to so easily and should have had it years previously. And it went exactly the same with both banks

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Hi @audioboy77, your residency really doesn't play any role here. If you decide to hold the property for a longer term refinancing the loan shouldn't be an issue, plenty of lenders will finance non-residents. 

 

If you want a variable rate loan you should get this from your current lender but you can expect to pay something like 5% APR for the year you hold onto the property. 

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4 hours ago, MadAxeMurderer said:

I took two mortgages spread over 4 apartments in 2008 with interest fixed for 15 years at about 5.4%. Back then it seemed like a good idea to lock such a low interest rate.

 

I renegotiated them at the start of 2019 while no longer resident in Germany. Interest is now less than 2% although I've ramped Tilgung up to 7% so I'm actually paying more monthly.

 

As the property values have more than doubled I enquired about increasing the mortgage, and also offered one of the mortgage companies to take on the other mortgage. None of this was possible as I wasn't German resident. But I was easily able to renegotiate the interest, and there was no suggestion of terminating my mortgage.

 

BTW The interest renegotiation went like this:

 

Me: Mortgage number xyz

Bank: What can we do for you?

Me: I'm paying too much interest

Bank: Talked for next 5 minutes making me an offer I couldn't refuse. 

 

I never expected the conversation to so easily and should have had it years previously. And it went exactly the same with both banks

 and what a great real estate deal you made...! Where have you moved to, dear Axemurder ?

 

Cheerio

 

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
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On 07/08/2020, 21:08:28, Paul@CRCIE said:

Hi @audioboy77, your residency really doesn't play any role here. If you decide to hold the property for a longer term refinancing the loan shouldn't be an issue, plenty of lenders will finance non-residents. 

 

If you want a variable rate loan you should get this from your current lender but you can expect to pay something like 5% APR for the year you hold onto the property. 

 

Ok thanks, this is encourgaging.  Can you recommend any particular lenders?  I would like to pre-discuss the situation with some propspective ones already. 


 

On 07/08/2020, 14:59:55, jeba said:

At the current level of interest rates I wouldn´t be too worried about taking out a longer term one. Firstly, it´s unlikely that rates will be even lower in 2024 (which means any prepayment penalty will be low or even zero) and secondly, whoever buys your property might be happy to be able to take it over from you (assuming rates won´t be even lower by then).


Possibly you misunderstood.  My current mortgage expires in Nov 2024, i.e. at the time I will be putting on the market.  So I will have to re-mortgage for the time it takes to find a buyer.  So my concern is that if I was forced (through lack of options ) to take out another 10 year fixed rate one from the current lender, and then sold around March 2025, I would basically have to pay 9.5 years of interest as a penalty.  This is the situation I want to be sure I can avoid.  (Because if I cant avoid that, then I will instead move back to Germany this year, and live in the flat myself until 2022, so I can sell before the mortgage expires but without the massive speculation tax bill.)

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18 minutes ago, audioboy77 said:

and then sold around March 2025, I would basically have to pay 9.5 years of interest as a penalty. 

No, you´d only have to pay for the loss of profit the bank might incur. Which is basically the difference between your contracted rate and the rate they can redeploy their money at (adjusted for the cost of some extra admin effort they have to make). If at maturity interest rates will be higher you might not have to pay anything (depending on how much higher they will then be) but they will be very happy to lend their money to someone else at a higher rate while their cost of refinancing stays the same - so their profit increases.

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I am redoing my mortgage soon, I talked to the man in the bank and he said that the bank would contact me about 6 months before the fixed period ends so soon. Then there are 3 options

1. Renewal - with more or less borrowed, at whatever the rate is for new mortgages at the time its redone.

2, Prolongation - same amount borrowed but at (currently) a lower interest rate for x years. 

3. Do nothing - it will go onto the variable rate that is currently in use. 

 

In your position and assuming you have the same options I would take the 3rd as it is easier to repay that quickly when you sell the house.

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On 09/08/2020, 05:41:39, SusieT said:

I am redoing my mortgage soon, I talked to the man in the bank and he said that the bank would contact me about 6 months before the fixed period ends so soon. Then there are 3 options

1. Renewal - with more or less borrowed, at whatever the rate is for new mortgages at the time its redone.

2, Prolongation - same amount borrowed but at (currently) a lower interest rate for x years. 

3. Do nothing - it will go onto the variable rate that is currently in use. 

 

In your position and assuming you have the same options I would take the 3rd as it is easier to repay that quickly when you sell the house.

 

Thank you, yes this is very reassuring.  If 3 is the automatic outcome for me too then its ideal.  I will bug my bank manager again to see I can get any reply and try to get him to confirm this.   Im with Commerzbank, if thats relevant.   (If you happen to also be commerzbank please tell me as then id be even more confident).

 

One detail, in case its relevant: the mortgate is in 3 parts, one main one but two are special KFW (?) ones, i think govt sponsored due to energy efficiency.

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One other question:  In Germany, is one 'allowed' to rent the place under a standard mortgage?  Or am I supposed to get permission from the bank?  (and if so does it affect the charge)

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36 minutes ago, audioboy77 said:

 

Thank you, yes this is very reassuring.  If 3 is the automatic outcome for me too then its ideal.  I will bug my bank manager again to see I can get any reply and try to get him to confirm this.   Im with Commerzbank, if thats relevant.   (If you happen to also be commerzbank please tell me as then id be even more confident).

 

One detail, in case its relevant: the mortgate is in 3 parts, one main one but two are special KFW (?) ones, i think govt sponsored due to energy efficiency.

I am not with Commerzbank, but a friend who works for a different bank to mine looked at the paperwork as well (I am doing calculations on the renewal before the meeting so I am well prepared) and said its standard mortgage conditions, so I would expect you will have the same options. I also have a KFW part to it, and as far as I know that is treated exactly the same so will just carry on. 
No idea aboutthe renting though, that is not something I was thinking of doing so I did not look into it. 

 

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1 hour ago, audioboy77 said:

One other question:  In Germany, is one 'allowed' to rent the place under a standard mortgage? 

Yes

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Save enough money between now and 2025 to pay off the debt. It's then yours entirely and to sell without any further restrictions/penalties.

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I rent all my properties. It's really none of the mortgage company's business. 

 

They care that you make your monthly payments. They don't care where the money comes from.

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On 10/08/2020, 12:59:53, audioboy77 said:

One other question:  In Germany, is one 'allowed' to rent the place under a standard mortgage?  Or am I supposed to get permission from the bank?

You can rent it out and you do not need permission from the bank. The mortgage is not affected by who is living there. You have to continue paying the bank, wherever you are and whoever is in the property.

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