When deciding between different types of home loans, one very important question to consider is very important! What should be the interest rate on our loan? We need to decide what’s in our life, what’s in it?
- low interest and risk or
- higher interest and security
Because they both give us something else.
The interest period may change, and if that period changes, the interest on the loan will follow.
Accordingly, there are two types of mortgage loans
- a short-term, variable-rate loan that changes every 3, 6 months, or annually.
- and long-term, fixed-rate loans, known for 3-10 years, up to the end of the term.
What is the difference between these two types of mortgage?
- with a short interest period, ie Floating Rate,
- in which case the base rate, ie the BUBOR, will be higher or rarely lower every 3 months, so if the BUBOR changes at the end of the period, the transaction rate will change to the same extent.
- the other reason for the variable interest rate is the function of the interest rate premium, which is an option to change the interest rate premium, which is fixed in the contract and can change every 3, 4 or 5 years.
- the long-term interest rate, ie Fixed interest rate, can only change according to the interest rate change index specified in the contract, ie it is fixed for 3, 4, 5, 10 years or until the end of the whole term.
Expert opinion: “The higher the initial interest rate, the longer the loan is fixed.” This extra option is for a fixed loan, which eliminates the risk.
Everybody can decide for themselves which one is the best solution based on their possibilities, their living situation, their financial background and their income.
A survey conducted by the central bank found that it is precisely families that are looking to buy shorter-term, cheaper loans that have to focus on securing a fixed-rate loan at the current surge in property prices.
How can my monthly installment change?
- The simplest is that if you choose a fixed loan all the time, interest and repayments will not change either.
- The following are two types of credit where the requirement is different.
For loans with an interest rate of one year or one year, the bank automatically applies the change of the reference rate, BUBOR, in the repayments. That is, if BUBOR stays low, it will do well, if it starts very up, then it will go wrong. Consider that a 1% increase in interest rates increases the average repayment rate by 8-9%.
According to the rules established by the MNB, the interest rate premium (interest = benchmark interest rate + interest rate premium) can be reviewed every 3-5 years by banks and adjusted according to the method set by the central bank.
Until recently, BUBOR was weakening. 3 years ago eg. a loan of 8 million with a maturity of 20 years paid a monthly repayment of HUF 47 thousand instead of HUF 57,000 due to the decrease of interest. Conversely, a 1% point increase could lead to an 8% increase in repayments.
Long-term loans can only change according to the interest rate change indicator specified in the contract. Fixed for 3, 4, 5, 10 years or full term.
How much do we have to pay?
What determines the borrowing rate? The reference interest rate for home loans is an external factor! In the case of an initial loan, the interest rate premium is determined by the credit institution.
The same applies to fixed loans, and what the bank expects to see in the coming years and the level of revenue it expects.
As a preliminary remark, in 2018 the central bank is planning a measure that will bring variable and fixed loan rates closer together.
We will help with the administration. This way, we are presenting a specific loan offer from several banks, which is valid for up to 6 months. We take care of the credit for you, and provide you with prompt solutions to any problems that may arise in the meantime. Comfortable, fast, reliable. Choose this option, our credit broker is waiting for you to apply, fill out our form, we will call you back!