16. Dec 16

Reducing interest burden – Loan withdrawal

Interest rates for building loans were considerably higher between 2010 and 2013 than they are today. Consequently, it may well be worthwhile withdrawing from real estate loans that were taken out after June 10, 2010.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: Real estate loans that were concluded after June 10, 2010 are not affected by what is sometimes referred to as the “perpetual” right of withdrawal coming to an end. It remains possible to withdraw from these if the bank or savings bank made use of flawed guidance on the right of withdrawal. As it happens, this is still often the case even in relation to more recent real estate loans.

Banks and savings banks have been obliged since June 11, 2010 to present various types of mandatory information in the guidance they use concerning the right of withdrawal. In doing so, it was sufficient for a few kinds of information to be specified as examples. A number of courts took the view, however, that the banks have not always made the right choices, e.g. by providing information which is irrelevant to a real estate loan, ruling that it is then almost impossible for consumers to clearly identify when the withdrawal period will commence. In light of such misleading information, these courts concluded that the withdrawal period never commenced and that it is possible to withdraw from a loan even years after it was taken out. That was the verdict, for instance, of the Oberlandesgericht (OLG) Celle [Higher Regional Court of Celle] in an indicative ruling from December 2, 2015 (Az.: 3 U 108/15).

Given the interest rate trends over the last few years and the current historically low rate of interest, it may still be worthwhile withdrawing from a more recent loan. While it ultimately always comes down to the terms that were agreed, a successful withdrawal has the potential to reduce the burden of interest by up to 25 per cent. However, it is scarcely possible for consumers to determine whether the guidance in question pertaining to the right of withdrawal satisfies the requirements. Lawyers who are experienced in the field of banking law can assess and establish whether the conditions for loan withdrawal are met.

In the case of older real estate loans that were taken out between 2002 and June 10, 2010, the withdrawal period finally expired on June 21, 2016. Anyone who withdraws from their loan on time should anticipate that their bank will not accept the withdrawal. Having said that, because the legal situation is usually unambiguous, withdrawal can be enforced in most cases and it is frequently possible to arrive at an out-of-court settlement with the bank.

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