Choosing a fixed-interest period — 10, 15, 20 or 30 years?

What the fixed-interest period really means

The fixed-interest period is the span of time during which bank and borrower hold to the agreed borrowing rate. Once it expires, either the loan ends — if you have repaid it in full by then — or it is extended through a refinancing at the market terms of the day.

Common fixed-interest periods are 5, 10, 15, 20 and 30 years. 10 years is the most frequent choice, 15 years the second most frequent; 20 and 30 years appear mainly among security-minded owners and in phases when rates are expected to rise.

10 years — the statutory safety anchor

It is no coincidence that a 10-year fixed-interest period is the standard choice. Ten years after full disbursement, you have a statutory right of early termination under Section 489 of the German Civil Code (BGB) — whatever fixed-interest period was agreed. In practice, you can therefore never be bound for more than ten years unless you want to be.

The 10-year fixed-interest period is usually the cheapest option in rate terms. It suits you well if you are comfortable arranging a refinancing fairly soon, if the remaining debt after 10 years will be manageable, or if you are planning larger unscheduled repayments in the meantime anyway.

15 years — the pragmatic middle ground

A 15-year fixed-interest period typically costs 0.15 to 0.4 percentage points more than 10 years — and gives you five additional years of rate certainty for what is usually a manageable extra cost. The Section 489 BGB mechanism still applies after ten years.

This option is often the economically smartest choice if you feel the refinancing risk in 10 years is too great, but the premium for 20 years is disproportionate.

20 years — security with an option in your favour

A 20-year fixed-interest period is effectively an insurance policy: you lock in today's rate for 20 years, yet thanks to Section 489 BGB you retain the right to refinance after 10 years if market terms improve. An asymmetric arrangement in your favour — which, of course, is paid for through a corresponding rate premium.

20 years is the right fit if you want maximum planning certainty, expect rates to rise over the next 10 to 15 years, and are prepared to pay a premium of typically 0.4 to 0.8 percentage points for it.

30 years — fully comprehensive cover for the security-minded

Some banks offer 30-year fixed-interest periods — usually as a full repayment loan, in which the entire remaining debt is repaid within the fixed-interest period. No refinancing risk whatsoever, but the highest rate premium.

This option is the fully comprehensive solution. It suits very security-minded owners, or buy-to-let investors who want their cash-flow calculation to remain unchanged over the entire repayment term.

What to factor into your decision

• Remaining debt after the fixed-interest period: What will realistically be left once you have repaid for 10, 15 or 20 years? With a small remaining debt, a long fixed-interest period is rarely economical.
• Stage of life: A growing family, a possible move, an inheritance on the horizon — all factors that can argue for a shorter fixed-interest period.
• Unscheduled repayment rights: Generous unscheduled repayment rights make shorter fixed-interest periods more attractive, because you can pay down the remaining debt faster regardless of the contract.
• Interest-rate environment: In low-rate phases, the desire for security justifies longer fixed-interest periods more readily. In high-rate phases, a shorter fixed-interest period is often the wiser choice, because it preserves your chance of a cheaper refinancing.