Combination Loans – The Most Important FactsCombination Loans - The Most Important Facts

A combination loans consists of two forms of loan. The combined loans can be repaid using a fixed-rate loan and a variable interest rate agreement. Borrowers benefit from the low market interest rates and at the same time have the option of a special repayment.

Combination loans – two types of loans

Combination loans - two types of loans

The combination loans is a loan composed of two types of credit. This type of loan combines a fixed-interest loan with a variable loan. If the borrowers have opted for a real estate or construction loan, they can benefit from the currently low interest rates on the market.

At the same time, the builders receive the option of special repayment through the combined loan.

  • The special repayments are usually associated with interest premiums. However, these interest premiums are required together with the general, long-term credit conditions. The builders can thus enjoy a free special repayment right.

Combination loans – users of this type of loan

Combination loans - users of this type of loan

Especially borrowers who expect additional income in the medium or long term benefit from combined loans. This can be done through an outstanding inheritance or gift. A borrower can also make special payments through the upcoming sale of an old property or a high deposit resolution. A combination loan is also possible for borrowers whose salary will increase in the future, such as:

  • through a promotion
  • through foreseeable strong profit-taking as a self-employed.

All these borrowers then have the option of repaying the variable loan portion more quickly. However, users of combined loans can also be borrowers who speculate in the future on falling mortgage rates. These borrowers then have to inform themselves at least once a month about the development of building rates.

  • Borrowers who opt for a combination loans must observe the interest rate development so that the variable loan portion does not become extremely expensive.

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