Is it worthwhile to decide on a home loan based on the interest period?
A new feature has been added to Good Finance credit calculator. You may feel that it is becoming increasingly important for any prospective borrower to feel secure after taking out a loan because of interest rate risks. That is why we have introduced an interest rate selector that makes it easy to find the cheapest loan that really suits us.
With a 5-year loan, raising interest rates is not a minor risk, but with 10-year or even 20-year maturities, it is even more worthwhile to think about how to build financial stability. In the case of loans with a longer interest period, this is precisely the predictability.
Everything has a price
Banks have already offered 20-year fixed loans (that is, the loan repayment installment will not change for 20 years), although they are much more expensive than loans with shorter interest rates. When browsing our calculator, it can be seen that there may be up to 10,000 differences in installments. Of course, it is a completely different issue that we can even benefit from a fixed construction if interest rates start to rise. At that time, the repayment installment of loans with a shorter interest rate period is starting to increase rapidly, with a 1-2 percent change, we can easily get over the fixed loan fee later.
When is it worth applying for fixed loans?
Depends. What is important to us? It is security or paying as little as possible for as long as possible. More specifically, you can determine when to choose fixed rate products.
When to choose fixed rate products for 5, 10 or 20 years?
- We are going to borrow for a longer term
- We are afraid of rising interest rates
- With the installment, we can’t put it aside
- It would be a problem if the repayment rate increased by 20 percent
- We prefer predictability