With the fixed-rate period, you determine how long the agreed interest rate for your construction financing is guaranteed to apply—ten, fifteen, twenty years or even longer. This one decision determines your monthly payment, your planning security and the amount of the remaining debt left at the end. We explain what the right term depends on, what happens after the fixed-rate period expires and why, thanks to Section 489 of the German Civil Code (BGB), you are never bound to your contract for longer than ten years.
What Does a Fixed-Rate Period Mean?
The fixed-rate period—also called the interest-rate commitment, fixed-interest term or interest-rate fixing—is the period for which the bank guarantees you the agreed borrowing rate. During this period, your monthly payment remains unchanged, regardless of how interest rates develop on the market. Fixed-rate periods of 5, 10, 15, 20 or even 30 years are common.
It is important to distinguish between the fixed-rate period and the loan term: Only in rare cases is a property loan fully repaid when the initial fixed-rate period expires. As a rule, a remaining debt remains, which you then continue to finance—the so-called follow-up financing.
How Long Should You Fix the Interest Rate?
There is no universally correct term, as the choice always also involves an assessment of future interest-rate developments. As a rough rule of thumb: The lower the current interest-rate level, the longer it is worthwhile to secure the terms. The higher interest rates are, the more likely a shorter fixed-rate period may be preferable—in the hope of obtaining cheaper follow-up financing later.
You should weigh up these factors:
- Interest-rate level: At the beginning of 2026, construction loan interest rates for a ten-year fixed-rate period average around 3.7 to 3.9 percent on the market. The interest-rate statistics of the Deutsche Bundesbank report an effective interest rate of around 3.7 percent for housing loans in spring 2026. This is significantly more than during the low-interest-rate period through 2022, but far below historical highs.
- Interest surcharge for long fixed-rate periods: Longer fixed-rate periods are more expensive. For a 15-year fixed-rate period, you currently pay around 0.2 percentage points more than for ten years, and correspondingly more for 20 years. You pay this surcharge asInsurance against rising interest rates.
- Need for security: Anyone who values a rate that remains unchanged for many years and does not want unpleasant surprises is well advised to choose a long fixed-rate period.
- Repayment and remaining debt: The longer the fixed-rate period and the higher the repayment, the smaller the remaining debt at the end – and the lower the risk of having to refinance later at significantly higher interest rates.
- Personal life planning: If you are planning to sell or make a larger special repayment, a shorter or particularly flexible fixed-rate period may make sense.
For most buyers, in the current market situation, a fixed-rate period of 10 to 15 years is a good compromise between interest-rate security and flexibility.
Advantages and disadvantages of a long fixed-rate period
A long fixed-interest period provides security, but costs an interest surcharge and some flexibility. You should weigh these points against each other:
- Advantage – planning security: Your rate remains fixed for many years; rising market interest rates do not affect you.
- Advantage – smaller remaining debt: With a long fixed-rate period, you repay more, so the follow-up financing is smaller.
- Advantage – protection against interest-rate shock: Especially if your calculations are tight, a long fixed-rate period prevents a subsequent interest-rate increase from jeopardizing your financing.
- Disadvantage – higher interest rate: From the outset, you pay a surcharge for the long-term security.
- Disadvantage – less flexibility when interest rates fall: If interest rates fall, you initially remain tied to the higher rate.
- Reassurance: The last disadvantage is significantly mitigated by the statutory right of special termination – more on this shortly.
What happens after the fixed-rate period expires?
If the fixed-rate period expires and the loan has not yet been repaid, you need follow-up financing for the remaining debt. In principle, you have two options:
- Continuation: You extend the contract with your existing bank under new terms. This is convenient because it involves little effort – however, the bank does not have to make you a particularly favorable offer.
- Refinancing: You transfer the remaining debt to another bank that offers better terms. The new bank pays off the old loan; only minor costs for the assignment of the land charge are incurred.
It is almost always worth comparing offers: Even a small difference in interest rates can amount to several thousand euros over the remaining term. You should review and negotiate the offers in good time – ideally one to one and a half years before expiry.
Right of Extraordinary Termination under § 489 BGB: Out After Ten Years
The most important protection for borrowers is laid down by law. Under § 489 paragraph 1 number 2 BGB, you may terminate any loan with a fixed borrowing rate ten years after full receipt – subject to a notice period of six months. Banks may not charge a prepayment penalty for this.
This has two important consequences:
- In practice, you are never tied to an interest rate for longer than ten years, even if you have agreed to a 15- or 20-year fixed-rate period. If interest rates fall or remain unchanged, you can exit free of charge after ten years and refinance on better terms.
- According to § 489 paragraph 4 BGB, this right cannot be contractually excluded or made more difficult – so you are always entitled to it.
Please note: The ten-year period begins with full receipt, meaning the complete disbursement of the loan, not with the signature. In the case of a new build paid out in instalments, the start of the period is correspondingly postponed. If a new interest-rate agreement is reached during the term – for example, in the case of a prolongation – the period begins again from this new date.
This considerably puts the supposed disadvantage of long fixed-rate periods into perspective: A 15-year fixed-rate period gives you the security of long-term interest-rate fixing, but after ten years still leaves the door open to you at any time.
Forward Loans: Securing Interest Rates in Advance
If your fixed-rate period expires in the next few years and you fear rising interest rates, you can secure today’s terms in advance with a forward loan. You conclude the follow-up agreement today, but the money is not paid out until later – at the end of your current fixed-rate period.
This is how it works:
- Lead time: Depending on the provider, you can fix the interest rate up to 60 months, or five years, in advance.
- Forward surcharge: The bank charges an interest-rate surcharge for this protection – roughly 0.01 to 0.03 percentage points per month of lead time. The first approximately twelve months are often free of surcharge.
- Bet on interest rates: If interest rates rise more than the surcharge by the time of disbursement, you have saved money. If they fall, you may have borrowed too expensively completed – you still have to take out the loan.
A forward loan is therefore primarily insurance against interest rate risk. Whether it is worthwhile depends on your risk tolerance and your expectations regarding interest rate developments.
FAQ on fixed-rate periods
Which fixed-rate period makes sense in 2026?
In the current market environment, with mortgage rates around 3.7 to 4.0 percent, a fixed-rate period of 10 to 15 years is a good compromise for most financings. It secures predictable installments over the long term and, thanks to the special termination right after ten years, gives you room to maneuver.
What is the difference between a fixed-rate period and the term?
The fixed-rate period determines how long your interest rate is guaranteed. The term is the period until full repayment. Since the fixed-rate period is usually shorter than the term, an outstanding balance remains at the end, for which you need follow-up financing.
Can I terminate my loan before the fixed-rate period expires?
Not ordinarily without further ado – early repayment generally incurs an early repayment penalty. The most important exception is the special termination right under § 489 BGB after ten years. If you sell the property, an extraordinary termination right also applies, although usually in return for compensation.
Does the ten-year period begin when the contract is concluded?
No. It begins upon full receipt, meaning the complete disbursement of the loan. If the loan is disbursed in installments – for example, in the case of a new build – the start of the period is postponed accordingly.
Is a fixed-rate period of more than 20 or 30 years worthwhile?
Very long fixed-rate periods incur a noticeable interest-rate premium. They are particularly worthwhile when interest rates are low and you want maximum security. In the current situation, many prefer a 10- to 15-year fixed-rate period and use the right of termination after ten years if necessary.
Conclusion: Finding the right fixed-rate period
The appropriate duration of the fixed-rate period depends on the interest-rate level, your need for security, and your life planning. In the current market environment, a fixed-rate period of 10 to 15 years offers most people a good balance between interest-rate security and flexibility. It is crucial that you know about the special termination right under § 489 BGB: After ten years, it releases you from any interest-rate contract and removes a large part of the risk from long fixed-rate periods. Plan your follow-up financing early, compare an extension with refinancing, and check A forward loan for you if interest rates are expected to rise.