A Bauspar-Loan is a second mortgageobtained after completing the saving period in a contractual savings for housing system in Germany. Using a unique Bauspar-Loan data set, consisting of 67811 Bauspar-Loans paid off or prepaid in 1998, 1999 or from January to September 2000, tests will be conducted if interest rates and borrowert characteristics affect the likelihood that a Bauspar-Loan is prepaid. Therefore, four different measures of prepayment incentives are constructed on the basis of mortgage and money market rates to find out what determines the prepayment behavior of mortgage borrowers.