22. Jul 16

Withdraw from loans, reduce interest burden

Playing the get-out-of-jail-free card and withdrawing from expensive real estate loans is still possible until June 21 without consumers having to pay an early repayment penalty.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: Interest rates are currently at a historic low. For consumers who had already taken out a real estate loan several years ago, this is a particularly bitter pill to swallow. They are paying comparatively high interest rates on their real estate loans. It is possible to appreciably reduce this interest burden by withdrawing from the loans in question.

A successful withdrawal means that the loan agreement is rescinded, i.e. the services performed to date by both parties are returned in full. Moreover, consumers are then also typically entitled to compensation for use with respect to the interest payments they have made. An early repayment penalty is not payable. On the contrary, it may even be possible as a result of a successful withdrawal to reclaim an early repayment penalty that has already been rendered in the case of a prematurely repaid loan.

In order to withdraw from a loan, it is necessary for the bank or savings bank in question to have made use of flawed guidance concerning the right of withdrawal. According to research conducted by the Verbraucherzentrale Hamburg (Hamburg Consumer Advice Centre), this is the case in around 80 per cent of the real estate loans concluded between 2002 and 2010. Consequently, the withdrawal period never commenced and it is still possible today to withdraw from the loans. Initially, this gave rise to a perpetual right of withdrawal in these cases. However, withdrawing from these legacy contracts is now only possible until June 21, 2016 following a change in the law. Investors who still wish to benefit from the low interest rates should therefore take action before it is too late.

While one should not be surprised if banks do not immediately accept attempts to withdraw, the legal situation is clear in most cases. Various courts have long since rejected the arguments commonly put forward by the banks, such as that the right of withdrawal has been forfeited or exercised in bad faith. That is why withdrawal normally succeeds. At the same time, this can also serve as a good basis for obtaining an out-of-court settlement with the bank and thus achieve more favourable conditions.

Lawyers who are experienced in the field of banking law can assess whether the conditions for loan withdrawal have been met.

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