Are you thinking about buying a home loan? It is time to show off with a very damaging affliction that prevents you from avoiding the sad fate of foreign currency lenders. Today, however, every opportunity is given to make a good decision. Our most important task is to act as a conservative borrower instead of greed!
Stupidity to choose the interest rate of a home loan on the basis of numbers alone!
I can’t say what you are doing with a total family budget harakir if
- You try to be smarter than the bank
- the best credit structure you think is the best monthly repayment
- you also consider the best monthly payment by comparing interest periods (so you choose the shorter interest period because it is cheaper)
- you believe that the economy will grow indefinitely
- deny the coming of the next cyclical economic crisis
And the point is exactly: the bank is spending hundreds of millions to pay for an expert machine that deals with predicting expected economic events all day. From now on, when I hear from a retail client that he will switch to a longer fixed interest period when he sees the drastic increase in interest rates, then I will just take my head and ask for the next ginger from the waiter.
The bank always incorporates the interest rate risk into the offer = the bank always wins
The bank always wins, but as a conservative investor, he does not seek absolute victory. In the case of loans, it does not maximize its profit (by a continuous increase in interest rates), but reduces its potential loss by always reaching its “operating temperature” in its interest rate pricing.
Credit Advisers, who deals with the topic of credit for about 2 weeks, comes to this and tries to predict the future during a coffee, and to make money on the bank in such a silly way that he is now borrowing for low repayment with variable interest rate / shorter interest rate and then extending it on the go.
You have to understand that by the time you notice this, the bank has raised interest rates for a long time. In addition, you are a lazy bitch, so 9 out of 10 will not rush into the bank with laziness and discomfort…
It is even worse if you choose a shorter interest period because you can’t pay longer
Of course, many people choose to have cheaper, but for a shorter period of time fixed rate loans. For them, the 10-year fixed-rate 10% fixed-rate mortgage on a floating rate housing loan is not fit for them.
It is very dangerous to get into a loan with a possible 10-15% increase in repayment already crushing the family budget. I always ask myself what these clients are going to do in 6 months / 1 year when they come to the first interest rate turnaround?
What will happen to them if interest rates rise by 1%? Because you know what a 1% interest rate change is for a 20M 20 year loan?
You will not believe it, but in the case of a 1% interest rate increase, you will have to pay as much as you would have made a fixed interest rate loan for 10 years! So your installment has already increased by 12%! What do you expect in a year? Can you pay more easily than now?
And what if the bank decides (in justified cases) to raise your interest rate by 1.3%? You’ll have 16% higher payouts than the beginning! So what is it that has happened in world history? Does your bank (up to 2 years in several steps) raise interest rates by 2.6%? Then your monthly repayment will be 27% higher in the foreseeable future! What do you pay for this?
When you decide, do not decide the interest period of your home loan based on today’s numbers and predicting the future.
The most important message of this article is that you don’t even choose a shorter interest period for making a decision, because you can’t pay the more expensive. And do not think that you can better predict the expected “economic future” than the bank.
So you do not compare two numbers during the interest period. Because obviously the cheaper is better. The decision you need to consider is your own borrowing strategy:
- how many years do I want to repay?
- what kind of house savings did I make next to it?
- what other resources do I have?
- I bought the apartment for investment or housing purposes – »How can I get rid of it easily?
- what kind of liquidation time does the property type predestine?
Want to save or borrow money?
- I want to make a home savings
- I want to set aside a retirement goal
- I want to save my kids
- I want to add credit to an apartment