How to find the best-fixed rate mortgage?

mortgage

Do you want to finance your accommodation and, at the same time, protect yourself from the increase in interest and benefit from the current minimum rates? A fixed-rate mortgage can be the solution. I’ll explain what you need to know before signing one and what to do to guarantee you the lowest possible interest.

How does a fixed rate mortgage work?

With a mortgage, you can make your dream of owning a home come true. To the money you have saved, add credit from a bank to buy a house or apartment. To apply for a mortgage, you can choose from over one hundred banks, insurance companies, and pension funds. You can also modulate your financing according to your wishes. 

Many opt for a long-term fixed-rate mortgage. And they have their good reasons. For years, interests have collapsed and it is interesting to take advantage of this opportunity, protecting oneself in the long term against the increase in interest. That’s exactly what a fixed-rate mortgage offers: set the interest rate for the duration of the contract and you will be protected from any increases. Well, right?

The advantages of a fixed-rate mortgage

If interest rises, holders of a fixed-rate mortgage are the winners. While everyone else will pay more, you will continue to enjoy the benefits of your standing order with a constant amount of complete relaxation. In addition to the potential savings, this model allows you greater planning security: an aspect, of this, particularly important for families with small children who must be able to afford the house and the mortgage for a long period. Those who generally value security will also be fine with a fixed-rate mortgage. For those who have a greater propensity to risk, alternatives are more suitable such as the Saron mortgage which allows you to save on interest but at the expense of security.

The Disadvantages of a Fixed Rate Mortgage

You can imagine them for yourself: those who took out a ten-year fixed-rate mortgage at the beginning of 2008 were left with a dry mouth. To secure a constant interest rate, these people paid a premium and the rate set at the time throughout the period, despite the subsequent drop in interest.

Fixed-Rate Mortgage or Saron? Existing models

If you don’t want to be tied to your bank or property for that long, you have various alternatives. You can, for example, take out a mortgage with a shorter duration that will allow you greater flexibility and better convenience. 

With the Saron mortgage, a credit agreement is entered into for a reference period, during which the interest rate is adjusted regularly to the Saron rate, which reflects the current level of interest and is applied to interbank loans. The decision in favor of a fixed-rate mortgage or Saron depends on your risk tolerance and your need for security. A Saron mortgage would have been agreed upon over the past decade because the interest level has steadily fallen.

For the third model of mortgage products, the variable rate mortgage, the opposite is true. Compared to the fixed-rate or Saron mortgage, this has very flexible cancellation terms and can be requested even for very small amounts. Flexibility pays off with a higher interest rate, which has been as high as ever over the past decade compared to other mortgage models.

Always compare fixed-rate mortgages

The composition of interest varies not only between individual mortgage models: even fixed-rate mortgages with the same maturity can be very different depending on the bank or insurance company. If you do a comparison you can save a lot of money. 

what you need to pay attention to if you choose a fixed-rate mortgage

When taking out a fixed-rate mortgage, you need to pay attention to some elements. Below is a summary of the fundamental ones.

  • Timing is essential: pay attention to the trend in interest rates
  • Knowledge is power: knowing mortgages will help you in bargaining
  • Read the small print: the credit agreement should be observed with a magnifying glass
  • Consider the alternatives: A Saron mortgage can also be affordable
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By Michael Caine

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