Why consider a variable interest rate with a mortgage loan?

Anyone who gets a mortgage today can do golden business. Due to the current interest rate setting, many mortgage borrowers prefer a fixed interest rate. Although, it may sometimes be cheaper to choose a variable interest rate.

Long-term interest rates are on the rise again. Between the start of the new year and March 15th, the 10-year Belgian long-term interest rate increased from -0.37 percent to -0.05 percent. The long-term interest rate is one of the most important factors that banks take into account when determining the rate of interest on a mortgage.

A recent study Van de Tejde learned from major banks that there are no plans in place to increase mortgage interest rates in the short term. In response to the financial news site, KBC economist Johan Van Gumbel told the financial news site that the bank could increase the rate if long-term interest rates continued to rise. “This increase will not be significant,” he added. Despite the recent increases, interest rates remain historically low. Over the past five years, the average long-term interest rate (ten-year OLO) has been 0.38 percent.

Low mortgage rates

So mortgage interest rates remain extremely low. to me Immotheker utility scale The average fixed interest rate over 20 years (81-100%) is 1.44%. That’s ten basis points less than a year ago.

Due to the low interest rate, many mortgage borrowers maintain the interest for the entire term of the contract. This ensures that the monthly installments are not changed once the prices rise. However, it can sometimes be helpful to follow the variable rate pathway.

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With a variable interest rate, you agree that the bank will change interest at specified times, such as every three years. This can mean both an increase and a decrease. Lenders must adhere to a number of rules when obtaining a mortgage loan with a variable interest rate.

Twice the maximum

First of all, the mortgage interest may be maximized during the term of the contract. For example, anyone who earns a variable interest rate of 0.8 percent will at worst have to pay 1.6 percent. In addition, many banks include a so-called “cap” in their contracts. This cap determines how high or low the interest rate can be with each revision. We were using Spaargids.be simulation The calculation is based on a 20-year housing loan in the amount of € 200,000.

If you take out a mortgage loan with a variable interest rate of 1 percent and a ceiling of 1 percentage point, you are paying € 845.48 a month at best. Twenty years later, she paid interest of € 5,575.17. Unchanged, you pay 919.38 € per month and in the worst case (as the interest has already doubled in the first review) 996.58 € per month. In these two cases, twenty years later, you paid 20,651.76 and 36,400.51 euros respectively in interest.

Let’s say you get a flat rate of 1.44 percent, you pay € 955.11 a month. At the end of the trip, she paid € 29,225.52 in interest.

Lower interest rates

Finally, the variable interest rate is usually lower than the fixed interest rate at the beginning of the contract. The lenders give you a “discount,” as it were, because in this way they share the risk of higher interest rates. With a fixed interest rate, the lender forfeits the potential additional income because they cannot adjust the rate in case the interest rate rises.

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If the interest rate drops, the rate will be adjusted down for free in the next review. This is not the case with a fixed-interest home loan. In such a situation, you will usually have to pay management costs and reinvestment fees if you want to refinance your home loan. Anyone who does this in another bank must pay an additional notary fee. After all, the mortgage loan has to be re-registered if you convert it to a competitor.

conclusion: When comparing home loans, it is always a good idea to ask for information about variable and fixed interest rates. You can ask your counselor to simulate both cases. This way you can estimate which formula is just right for you.

(TB) (JFD)

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