Record low interest rates on mortgages give you many opportunities. You can secure low interest expenses for the rest of your life. How do you choose the right mortgage loan?
The three choices
A loan with a fixed interest rate of 2.5% over 30 years, that is what you as a new home buyer are currently looking at. It offers very low services, and most Danes with owner-housing ambitions have the opportunity to buy cheaper than it costs to rent. Historically, it is also cheap – in fact, it has not been so cheap since before World War II. Therefore, you should seize the opportunity while it is here.
You will find the right mortgage loan through 3 choices. Interest type, which is the most important, deducted size and maturity.
Fixed or variable interest rate
You should start by examining whether a fixed or variable rate is best for you. It is a matter of risk. Both loan types are at risk. The variable interest rate thus gives you unlimited risk, while the fixed interest rate gives you a limited risk.
It is therefore about both purely objective criteria, such as how much an interest rate increase will affect your finances, or whether you already have a high risk on your wealth from an increasing interest rate – and on some subjective conditions as if you can sleep at night If you choose a variable rate. For this last consideration, it must always be said that interest rate increases can happen quickly (and often have done over time). So you should NOT expect that you can do anything if interest rates rise.
You also need to look at the likelihood of an interest rate increase, but don’t use counselors to predict this. Here the story shows a very poor hit rate from the experts. However, you can tell yourself that the lower the interest rate will be, the closer we are to an interest rate increase. This factor must be taken into consideration when choosing a repayment / maturity.
Fixed or variable rate – what type of loan should you choose?
The deduction must be raised
The lower the interest rate in the community, the more you should pay off on your loan. For example, if you choose a 30-year fixed-rate loan today, the benefit on this loan is only half of what the benefit was on a loan of the same type 10-15 years ago. If you choose a floating rate loan today, then you should think about reducing the risk of withdrawing quickly.
That is, the more revenue you have and the safer they are, the more you should deposit as a fixed installment on your loans. A loan with a 1-year variable interest rate could thus be deducted at approximately the same cost per month today over 10 years, which it took 30 years to withdraw the loan 10-15 years ago. It is worth remembering.
In this context, you can choose to ask yourself how quickly you can pay off your loan? For example, a 10-year loan with a 5-year variable interest rate is an opportunity for you even if you are not at variable interest rates?
The maturity can be freely set by you, so when you have chosen the interest type, then you can do the maturity as short as possible.
The possibilities are many in the market at the moment, so remember to use them in your personal finances.
What does it cost to change a mortgage company?