The decision of the Munich I Regional Court was published in the Federal Gazette on March 16, 2022.
Real estate loans: Avoid, reduce or recover early repayment penalties
Anyone who wants to or has to repay their real estate consumer loan with a fixed borrowing rate (real estate loan for short) to the bank before the agreed end of the interest period must expect the bank to demand payment of an early repayment penalty. The reason for this is that the bank loses interest due to the early repayment, which it would have received if the loan had not been repaid until the agreed date. The bank is attempting to obtain compensation for the loss and profit it has incurred through the required prepayment penalty (also known as an early repayment fee or charge).
The demanded early repayment fees are still very high, averaging around 10 percent of the remaining capital, according to a study published in November 2019 by the market watchdog team of the consumer center Bremen. It makes many borrowers shy away from rescheduling their old, high-interest real estate loans – despite (or because of) the current extremely low interest rate level.
After the computations of the consumer advocate were too high in three of four of the examined cases (77 per cent) the prepayment penalties demanded by the banks. The determined difference between the prepayment penalties demanded by the credit institutions and those calculated by the consumer center amounted to an average of 5 percent in favor of the borrowers.
No matter for what reason you want to terminate the contract early, the question always arises whether you have to pay an early repayment penalty charged by the bank. However, as a consumer, you do not have to accept any demand from the bank without a second thought, because the prepayment penalty often turns out to be unjustified or much too high!
For all real estate loan agreements that were concluded between June 2010 and today, there are basically two options that can be used to ward off the bank’s claim. Which one comes into consideration for you depends on your specific individual case.
Avoiding or recovering early repayment penalties through revocation
First of all, it is obvious to check the revocation options of the real estate loan. In more than half of all loan agreements concluded after June 11, 2010, there are incorrect revocation instructions or incorrect or incomplete mandatory information required by law (e.g., if the consumer was not properly informed of his or her right of revocation). The courts have so far identified more than 400 incorrect formulations in the revocation instructions.
If your loan agreement also contains such errors, the agreement can be revoked and unwound – even years after it was concluded. In the case of real estate loans, there is generally a right of revocation of 14 days, provided that the revocation information is correct. If, on the other hand, the borrower was incorrectly informed, he can still revoke his contract beyond this period.
For real estate loan agreements concluded since March 21, 2016, however, there is a restriction: Even in the case of incorrect revocation information, the revocation can only be declared retroactively for twelve months plus 14 days (the regular revocation period)! The reason for this is the special statutory provision for real estate consumer loan agreements of the German Civil Code (Section 356b (2) BGB).
The successful revocation of a contract has the consequence that it is treated as if it had never existed. This in turn means that the borrower does not have to pay any early repayment penalty or can recover any early repayment penalty already paid: If no contract exists, logically no compensation can be claimed.
However, this solution is often not possible: Sometimes a revocation is no longer possible in terms of time, sometimes the revocation was correctly instructed or the complete reversal of the contract proves to be uneconomical due to the refinancing.
But even in cases where revocation is not (or no longer) possible, the early repayment penalty can usually be significantly reduced and often even completely avoided.
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This has now been confirmed by the public prosecutor’s office in a press release.
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