Are you going to build or buy a house? These are large expenses that require a lot of money. For these types of amounts, we therefore usually take out a loan that often has a long duration – on average 22 years. In our example, we assume the convenience of real estate, because you usually pay the longest on a housing loan. And interest and borrowing costs must be paid on a loan. The interest rate is therefore important when choosing the cheapest provider. Some institutions only offer a fixed interest rate, with others you have the choice between a fixed and a variable interest rate. But what exactly does this mean for the interest on your mortgage?
Fixed interest rate
Like everything in life, both types have advantages and disadvantages. With a fixed interest rate, the same interest rate is always used as when you signed the home loan. During the term, you therefore pay the same amount each month. That way you can also plan better for your other expenses. It is precisely when the interest rate is high that variable interest rates are chosen more often in the hope of a fall. At most financial institutions, the variable interest rate for a mortgage is currently 1 or 2 decimals lower than the fixed interest rate, but it can rise again at any time. Your payment will increase with a variable interest rate, and that is less fun. Because the variable interest rate can fluctuate, you will never know in advance what the final repayment amount of your loan will be at the end of the term.
Fortunately, the Belgian government has limited the rise in the variable interest rate. For example, the variable interest in the second year may not increase by more than 1% of the original interest rate. In the third year this is at a maximum of 2%. Larger fluctuations can only occur afterwards, but the interest rate can never more than double for the duration of your credit. Yet a relatively small increase can cost you thousands of USD more at the end of the term. So do some research and go to the website of the providers to compare them via their simulator tool. That way you can find the cheapest provider at the lowest interest rate.
3 in 4 Belgian borrowers opt for a fixed interest rate, because it is currently historically low. In this way you will not be faced with any surprises in the future, because you will certainly play. You pay slightly more than for a variable interest rate, but the difference is often only a decibel or one and a half (0.15%). At the age of 20 or 25 that of course makes a difference, but most of us prefer to sleep on two ears at night rather than worry about it for years. So do your homework and calculate who can offer you the cheapest loan. Via this page you can make a fixed calculation of your installment by comparing the cheapest providers. Simulate it!