Termination Variable loan
Variable loan termination
within one month of notification of the change with immediate effect. You have the right to terminate the contract within three months. These are loans with a variable interest rate, also called variables. With the termination option you have the flexibility to react quickly to a changed situation. Increased repayments are possible subject to a notice period.
Derivation: understanding, application and evaluation
Contents: This book presents the most important derivatives currently traded on the stock exchanges: The first step is to explore the basic structure of the derivations discussed. Which products are sold or sold with the corresponding derivative instruments? What is the procedure of such a trading transaction and where or how can the derivative financial instruments be handled?
Only those who apply derivations to specific questions have really understood them. Therefore, in the present work, great importance is attached to the use and the use of the corresponding derivations for specific questions and problems. On the one hand, the factors influencing the market value of the corresponding derivations are explained, and on the other hand, the actual calculation process behind the pricing becomes transparent.
Swaps Part E: Credit Derivatives Part Q: Do We Need Derivative Financial Instruments? Before that, he spent many years in senior positions in investment banking in derivatives and transaction banking at HypoVereinsbank.
Statutory qualification of the interest compensation for the early termination of the contract for variable interest financing at fixed interest rates
The interest rates should be as cheap as possible. The favorable interest rate should be set as long as possible. Thus, a fixed loan can be provided with the possibility of non-compensated repayment without the borrower in the event of early repayment of a discount refund claim.
The nominal interest rate on this loan would be in line with the currently favorable credit conditions (request 1). The interest would be fixed in the long run (wish 2). However, the effective interest rate of the loan would be higher than comparable fixed rate loans due to the discount. Part of the loan can be repaid without compensation (request 3). However, due to the granted special repayment right, the applicable rate will be above the average market conditions for long-term loans (no fulfillment of request 1).
On the one hand, consumers were offered to borrow a variable loan, the interest rate of which is based on the development of the Bankate, ie a short-lived money market rate applicable in interbank trading. For this purpose, a premium (eg 1%) has been added to the Bankate. It is known that loans with variable interest rates are repaid without compensation, subject to a quarterly period. On the other hand, the consumer should at the same time enter into an interest restraint transaction in such a way that BuyNer grants the consumer an interest subsidy if an interest ceiling of Bankate (eg 5%) is exceeded.
If this upper limit was exceeded, the client was therefore forced to guarantee the house bank a minimum interest rate. The interest subsidy paid by the customer was thus the same: The interest was paid by the customer: In summary, the proposed financing option looks like this: with a Bankate of more than 5%: The customer pays Bankate plus surcharge, she or he receives the Bankate minus interest barrier, in total: Bankate + surcharge – (Bankate interest barrier) = interest barrier + surcharge In the example, the customer pays 6%. For a Bankate between 4% and 5%:
Customers pay Bankate plus surcharge, they receive nothing and pay nothing from the interest-limiting business: Bankate + surcharge In the example, the consumer pays any interest between 5 and 6%. For a Bankate below 4%: The customers pay Bankate plus surcharge and secure the lower interest limit with interest upper limit minus Bankate total: Bankate + surcharge + (interest limit -Bankate) = interest upper limit + surcharge In the example paid by the Customers 6%.
Only in a narrow Bankate interval between 4 and 5% is it provided with an interest of between 5 and 6% interest. Even after completion of these transactions, the interest rates were still on the way down, so that at some point the lower interest limit was exceeded, from which the client had to earn the interest subsidy in addition to the variable loan interest at a total of 6%.
This worried consumers and they recalled the desire expressed in paragraph 3 to repay prematurely and without compensation. In fact, the variable-rate loan was repaid without compensation, provided that the three-month period was observed. The lender, however, requested a cancellation fee for the early cancellation of the interest rate caps, which it justified as follows: Through the interest rate cap agreement, it secured interest income in the amount of the upper interest rate minus Bankate over its duration.
Although the lender had never addressed this issue prior to signing the contract, he suggested he meet all three claims of the borrower. There is a second type of variable loan and fixed interest rate: Again, the consumer is offered to take out a variable loan. However, this variable rate loan is concluded in a foreign currency (eg CHF loan).
The object of the swap transaction is the obligation of the principal bank to reimburse the consumer monthly the variable interest in relation to the nominal capital (= debt capital in CHF). BuyNer thus pays interest on the variable borrowed capital. In contrast, the customer is obligated to pay the nominal capital (= debt in EUR) every calendar month at a fixed interest rate. In this case, the customer is obliged to pay the interest.
The client pays a fixed interest rate on a loan denominated in EUR. As interest rates continued to fall, consumers once again began to terminate the variable rate loan with three months’ notice, as no early settlement fee was due, but a cancellation fee for the swap agreement that reintroduced the equivalent of a prepayment penalty at the back door.
She had advertised on the pretext that there was a possibility of early repayment without compensation for the floating rate loan (Request 3).