Prepayment penalty
The prepayment penalty ( VFE ) is the payment for the unscheduled repayment of a loan during the fixed interest period . If the contractually agreed loan has not yet been paid out, one speaks of a non-acceptance fee . The rules of the VFE apply analogously to these.
The VFE is due when the customer cancels the loan. If the bank terminates the contract due to a breach by the borrower of his contractual obligations ( important reason ), the bank has a claim for damages against the customer, which is calculated in the same way as VFE.
Economic background
The VFE arises when a fixed-rate loan is terminated. With these, the bank undertakes to keep the interest rates unchanged over the agreed fixed interest rate period even if the current interest rate situation has changed. In Germany, long-term fixed interest rates are common in real estate financing . In many other countries, mortgage lending is at variable interest rates. In principle, there is no VFE with a variable interest rate agreement.
In order to guarantee the bank's guarantee of long-term interest rates that remain constant, the bank refinances, ideally, with matching maturities , i.e. H. To refinance a 10-year loan, the bank uses 10-year deposits or bonds .
If the loan is now repaid prematurely, the Bank incurred under the Marktzinsmethode a funding loss and a margin damage because they can not to return prematurely for contractual reasons the deposits used to refinance or bonds.
The refinancing damage results from the refinancing structure: the bank refinanced the loan when the loan agreement was signed at the interest rate for the fixed interest rate at the time. If the market interest rates change at the time of the early repayment, the bank cannot reinvest the money repaid early, not at the original but only at the current market interest rate. The difference, based on the remaining term, is the refinancing loss. If the reinvestment rate is higher than the original interest rate, there is a refinancing profit for the bank.
The margin damage represents the reduction in the bank's profit. The bank makes its profit by paying less interest on deposits than on loans. The difference (the margin) of the bank is higher, the longer the loan runs. If the loan is repaid early, the bank will no longer generate a margin for the future. This loss of future earnings is the margin damage.
Both components together represent the total damage to the bank and thus the basis of the VFE calculation.
Legal situation in Germany
Loans secured by mortgage (e.g. building loans)
Right to cancel loans
In principle, the banks are not obliged to take back loans secured by real estate before the fixed interest period has expired. In justified individual cases, however , the bank must agree to an early redemption. The BGH has developed a permanent case law on this. Justified individual cases are, for example, the sale of the property or the desire to extend the original loan, which the lender refuses.
Cancellation options without a prepayment penalty
In the case of fixed interest rates that run for more than ten years, after ten years there is the option of canceling without VFE with six months' notice. The ten-year period begins on the date the loan is received in full (see also Section 489 (1) No. 2 BGB). In the case of loan extensions, the date of the agreement takes the place of the date of full payment. Early termination options can be contractually agreed before the fixed interest period has expired. Loans to consumers that are not secured by a mortgage can be terminated free of charge with three or six months' notice.
In the case of loans with variable interest rates, a VFE can only be requested for the period in which the right of termination is excluded for three months.
It is often wrongly quoted on the Internet with reference to the judgment of the Higher Regional Court Karlsruhe of June 25, 2001, that a prepayment penalty does not apply to bank mergers. However, this is only the case under extremely tight conditions.
Calculation of the early repayment penalty
The lender can demand the loss of interest due to termination (Section 490 (2 ) sentence 3 BGB ). Damage occurs in any case if the contractually agreed interest rate is above the current rate for a replacement transaction. Replacement transactions can be new lending ("active-active method") or investment in mortgage Pfandbriefe ("active-passive method").
With the active-active method, in addition to the damage from the interest rate difference (so-called deterioration in interest rates), there is also a so-called "interest margin damage" because the bank misses the imputed profit for the remaining term. The longer the remaining term until the end of the fixed interest period, the higher the compensation . In the established case law, a “net interest margin” - i.e. adjusted for risk costs, administrative expenses, etc. - of 0.500% is recognized. In most cases, the active-active method is the cheaper solution for customers - it is therefore not used by most credit institutions.
With the active-passive method, the defaulting payments are first recorded in the form of a cash flow. These payment defaults, faked by a large number of mortgage Pfandbrief transactions with different yields staggered according to the term, which are considered to be completed at the time of loan repayment, are offset by their interest and repayment amounts. Since the amount of money required to conclude the replacement business is greater than the loan capital repaid early, there is a difference. It represents the damage (= VFE).
The BGH ruled on November 30, 2004 (XI ZR 285/03) that no so-called “PEX yields” (mortgage Pfandbrie index of the Association of German Mortgage Banks) are used when using the active-passive method for calculating the early repayment penalty because these do not represent any returns actually achieved on the market. These are pure offer returns, but they can be so low that Pfandbrief buyers do not want to conclude any transactions at these returns. The prepayment loss is therefore too high under these returns.
In principle, regardless of the method used, all repayment options (including special repayments) as well as the risk and administrative costs saved by the bank must be taken into account. The bank may request a processing fee for early redemption. According to the judgment of the OLG Schleswig , Az .: 5 U 124/95 of January 8, 1998, saved administrative costs of € 5.11 per month are to be deducted. With regard to the deduction of risk provisions, credit institutions try to reduce this to a level of well below 0.1% of the capital - according to credit experts and the Federal Association of Consumer Organizations, a risk cost deduction of 0.15% is appropriate.
A possible discount is not to be reimbursed to the borrower on a pro-rata basis because it represents an advance payment of interest. Since it reduces the loan interest, however, it leads to less damage and is therefore taken into account indirectly. A pro-rata discount reimbursement is only to be taken into account in those cases in which either the discount covered a longer period than that until the next possibility of termination or if special repayments were possible.
Loan contracts are always form contracts. Therefore, the supplementary provisions of the law of the General Terms and Conditions apply. According to this, the borrower always has the option (BGB § 309 para. 5 b) to counter evidence of a lower loss based on a VFE calculation by the credit institution. This is usually the case when the credit institute settles the VFE according to the active-passive method - but at the same time carries out a direct new loan. This is the case regularly if, for example, when a house is sold where loans are redeemed, the house is refinanced through the same credit institution.
Termination by the bank
Even if the bank terminates the contract (typically due to payment arrears), the bank incurs the same damage mathematically as if the borrower terminated it. According to the case law in force up to January 2013, a calculation of a prepayment penalty is therefore also permissible in this case. At the beginning of 2013 the BGH indicated in an oral hearing that it might change its previous case law in favor of consumers (borrowers); he confirmed a previous decision of the Frankfurt Higher Regional Court.
In a ruling of January 19, 2016, the BGH decided that Section 497 (1) BGB in the version valid until June 10, 2010 represents a special regulation for calculating damage in the event of non-performing loans. The regulation excludes that after termination by the bank, in addition to default interest, a prepayment penalty is also required.
Home savings loan
There is no VFE for the early repayment of loans from home loan and savings contracts . Cancellation is possible at any time and without observing a deadline, as can special payments. This is regulated in the general terms and conditions for building society savings (ABB).
Consumer loans (e.g. installment loans)
When a consumer loan is terminated , the early repayment penalty is limited to 1.0 percent of the amount repaid early (or 0.5 percent if the remaining term is less than one year) (cf. § 502 BGB). In accordance with Section 503 of the German Civil Code (BGB), this principle does not apply to loans secured by real estate at customary, market-driven conditions.
Consent termination of the contract
The bank is free to waive the calculation of a VFE in whole or in part. In practice, it will do this if it does not suffer any damage through a replacement transaction or the continuation of the contract with changed conditions. In practice, this usually takes the form of an exchange of property or an exchange of debtors. When swapping property, the debtor sells a property and buys a new one. The old loan agreement will be continued (and increased if necessary) with the new loan security and the old conditions. From the bank's point of view, it is essential that the new property is at least as valuable as the old one. When the debtor swaps, someone else enters the loan agreement instead of the previous debtor. In the case of a property sale, this can be the buyer, for example. Here it is essential that the creditworthiness of the new debtor corresponds to that of the old one. In either case, there is no disadvantage for the bank. If she agrees to such a contract change, she will not charge a VFE, but only a processing fee .
VFE in other countries
In the USA it is common to contractually agree a VFE-free repayment option. The banks on the capital market protect against the risk of early termination (especially in the event of interest rate cuts). The cost of this security increases the home loan interest.
In England, variable interest rates are common on real estate financing. VFE does not arise due to the system. However, banks charge so-called 'Mortgage Exit Administration Fees (MEAFs)'.
In Spain, variable interest rates (based on the 6 or 12 month Euribor with a corresponding adjustment to the due date) are also common for real estate financing. VFE are therefore not incurred, although a percentage (usually 1%) of the remaining debt is contractually agreed as a fee even in the case of complete redemption.
Most of the other EU countries have statutory regulations that regulate the calculation of VFE. Politically in the interests of consumer protection, these are usually designed in such a way that compensation for the damage to the bank is not achieved. The statistically expected prepayment damage of the banks is included as a cost factor in the bank calculation and increases the lending rate.
According to a study by the Institute for Financial Services , there is no other country in the euro area that has such a high prepayment penalty as in Germany. Conversely, the (credit) interest rates in Germany are at the lowest level within the euro zone.
Individual evidence
- ↑ fundamental BGH, judgment of July 1, 1997 - XI ZR 267/96, compare BGH XI ZR 197/96, XI ZR 198/96, XI ZR 27/00, XI ZR 285/03
- ^ Judgment of the XI. Civil Senate of the Federal Court of Justice of January 17, 2013, Az. XI ZR 512/11 - Acknowledgment judgment
- ^ Judgment of the Frankfurt Higher Regional Court of November 23, 2011, Az. 9 U 76/10
- ↑ XI ZR 103/15
- ^ BGH judgment
