Rate Lock and Prolongation
Fixed-rate loans with a rate lock (Zinsbindung) and what happens at its end: prolongation or follow-up financing, recorded as a Renewal in LoanMonitor.
Rate type: fixed with a Renewal at the end of the lock
Also known as: Zinsbindung, Festzinsdarlehen, Prolongation, Anschlussfinanzierung, rollover
The interest rate is fixed for an agreed period, often shorter than the full amortization. At the end of the rate lock the bank offers new conditions and the loan continues, usually with a new rate, sometimes with a new maturity or installment, occasionally with a top-up.
How it works
Until the renewal date the schedule follows the original conditions. From the renewal date the remaining balance is treated as a new loan segment with the new rate and, if agreed, a new maturity or installment. Nothing before the renewal changes.
Example
100,000 EUR, annuity over 5 years, 4.00 % p.a. fixed for 2 years, renewed at 5.00 % p.a. from year 3 with the maturity unchanged.
| Year | Rate | Installment | Interest | Principal | Remaining balance |
|---|---|---|---|---|---|
| 1 | 4.00 % | 22,462.71 | 4,000.00 | 18,462.71 | 81,537.29 |
| 2 | 4.00 % | 22,462.71 | 3,261.49 | 19,201.22 | 62,336.07 |
| 3 | 5.00 % | 22,890.34 | 3,116.80 | 19,773.54 | 42,562.53 |
| 4 | 5.00 % | 22,890.34 | 2,128.13 | 20,762.21 | 21,800.32 |
| 5 | 5.00 % | 22,890.34 | 1,090.02 | 21,800.32 | 0.00 |
| Total | 113,596.44 | 13,596.44 | 100,000.00 |
The one-point rate rise costs 1,282.89 more interest over the last three years and lifts the installment by 427.63. Had the bank kept the installment instead, the term would have extended; both choices are available on the renewal.
In LoanMonitor
- Wizard, Terms: rate type Fixed. Enter the contractual maturity date under Schedule; the end of the rate lock is noted in the loan's agreements or documents.
- At the end of the lock, open Adjustments → Renewals and add a renewal with the effective date, the new maturity, the new rate (leave empty to keep the current one), optionally a new repayment plan and installment, and an optional top-up paid out on the effective date.
- For annuity segments choose the resume behaviour: Higher payment keeps the maturity, Extend term keeps the installment.
- Every renewal stays in the loan's change history, so the full rate path is traceable.
A renewal changes the conditions of an existing loan. If the bank actually pays out a new loan that repays the old one (true refinancing with a new contract), record a new loan and close the old one with an extra repayment.
Related
Balloon Loan
Balloon loan (Darlehen mit Restschuld): partial amortization through a fixed installment, with a large final payment that settles the rest.
Grace Period and Payment Holiday
Loans with interest-only start years (tilgungsfreie Anlaufjahre, e.g. KfW) and payment holidays with capitalized interest, set up as plan changes in LoanMonitor.