Home / Articles / Loan margin and rising interest rates: How do you manage the financing costs of real estate investment?

Loan margin and rising interest rates: How do you manage the financing costs of real estate investment?

Rising interest rates have been one of the biggest concerns for real estate investors in recent years. For many, leveraging debt is a key part of their real estate investment strategy, but when interest rates rise, the profitability of the investment is also put to the test. In this article, we take a closer look at how mortgage costs are calculated and what concrete measures real estate investors can take to manage them, especially when interest rates are rising or fluctuating.

🔍 What determines the interest rate on a mortgage?

The interest rate on a mortgage consists of two parts:

In 2022–2023, Euribor rose rapidly to over 4%, which dramatically increased loan servicing costs, especially for those investing with leverage. However, interest rates have taken a turn during 2025: for example, on May 23, 2025, the 12-month Euribor had already fallen to 2.096%, bringing relief to many investors.

This serves as a reminder that interest rates fluctuate – and investors should both protect themselves against rises and remain alert in falling markets with regard to potential refinancing opportunities.

🧠 How can real estate investors manage their financing costs?

1. Compare loans and actively negotiate the margin

The margins offered by banks can vary surprisingly widely – by as much as 0.5 percentage points. Although the difference may sound small, on a €200,000 loan it means up to €1,000 in additional annual costs.

💬 Example: If you get a margin of 0.75% from one bank and 1.25% from another, on a €150,000 loan this means savings of around €750 per year.

Tips for competitive bidding:

2. Select the reference rate that suits your situation

The choice of reference rate has a material impact on the risk profile and cash flow of the investment:

Who is a fixed interest rate suitable for?
Investors who value a steady cash flow and want to protect themselves against interest rate spikes, especially with long loan terms.

3. Consider interest rate protection – but understand the costs

Interest rate hedging can limit the risks caused by rising interest rates. Hedging can provide peace of mind, especially for investors with larger portfolios and small margins.

Typical protection methods:

💡 Remember: Interest rate protection comes at a cost – either as a one-time fee or in monthly loan installments. Calculate the profitability in relation to the level of risk.

4. Repay your loan efficiently

Extra repayments reduce the amount of future interest and improve the cash flow of the investment in the long term.

Methods of implementation:

5. Monitor the interest rate market and react in a timely manner

Predicting interest rates is not easy, but monitoring developments makes it possible to prepare for changes in good time.

Good sources:

📊 Tip: Check annually whether the terms of your existing loan could be updated or renegotiated if your circumstances change.

6. Optimize other real estate investment costs as well

Interest expenses are only part of the picture. Well-managed property expenses can significantly improve the profitability of an investment.

Be sure to check at least:

✅ Summary: Manage your financing costs – protect your returns

Interest rate fluctuations are part of the world of investing, but you can prepare for them. Managing financing costs is an important part of a real estate investor's toolkit. By comparing loans, negotiating margins, choosing a reference rate wisely, and considering hedging solutions, you can protect the return on your investments and improve the sustainability of your cash flow – in both upturns and downturns.

To sum up, here are the methods to remember: