The term redemption stands for the transfer of an existing loan from the previous bank to a new bank. The debt as such remains and is only continued by a new lender.
A replacement is usually associated with improved conditions for the borrower. Such a transfer is often carried out after the end of the fixed interest period as part of the necessary follow-up financing.
All requirements relating to ordinary termination are regulated by the legislature in § 489 BGB (Civil Code).
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As of March 16, 2020 – Source: Deutsche Bundesbank
Loans are redeemed and transferred from one bank to another, the borrower issues an order to the previous bank, citing the new bank.
A transfer agreement is then made between the two, in which, for. B. the further handling of the collateral provided is also regulated.
The transfer of such loan collateral is carried out by a trust order. This states that the previous lender may only dispose of the agreed transfer fee when all collateral has been transferred to the new lender in a legally effective manner.
- the loan interest (until the date of redemption)
- prepayment penalty (if applicable)
- all transaction costs (for the transfer of collateral)
A subtotal results from these amounts. Possible discounts, term-related costs, other interest and possibly amounts for the repurchase of insurance (e.g. residual debt insurance) are then deducted from it. The result is the actual transfer fee.
If you want to change the term of a loan through a debt rescheduling, you usually have to pay a prepayment penalty to your previous bank for such early termination. This enables the bank to compensate for lost interest payments.
- Without a prepayment penalty, early termination is possible if the borrower has taken out a loan with a variable interest rate. In addition, early termination of the contract with the help of an extraordinary termination can be legal. This is the case if the agreed rate fixation phase is more than 10 years.