The mortgages are terribly cheap, but there are risks now. Mortgages usually have a maturity of 20 years, so don’t expect to pay the bank so little. What should one pay attention to when taking out a home loan?
The risk with today’s loans is high because the APRs of today’s loans are so low that there is really only an upside. Of course, the central bank may lower the base rate even further and lower the cost of retail loans by a factor of one, but this may dwarf any possible increases over the next 20 years.
Before you take out a loan, it is worthwhile to look at how much income you have and how much you spend per month, that is, how much you will have to pay off your loan.
This is the amount the bank will look into, but you might also want to consider what if someone loses their job or the interest rate changes. If you feel you could pay an even higher 20 percent installment, you probably won’t have a problem paying.
Market loans are cheaper at some banks than interest rate subsidies, but you may want to apply for the latter – we learned from this BankRation credit comparison. Although there is no interest rate subsidy on loans below six percent interest rate, we can be protected from overdue charges for 5 years if we choose this facility.
This may be especially important for shorter loans of around 10 years, as after the first 5-year interest-subsidized period, you will only have a smaller amount of capital at the bank, so you will have to pay less interest. Or, the interest rate risk is lower already towards the end of the term.
Fixed loans are a little more expensive, as the bank takes a greater risk in disbursing it, but it may be worthwhile to opt for a longer-term loan right now (within the interest period, the bank cannot change the interest rate on the loan, even if the central bank base rate changes).
For products with a fixed term of three or even five years, the loan fee will certainly not change during this period, and we will be better prepared for future changes. Maybe we can pay it off at the right time.
It is almost always worth a prepayment if we can, as interest rates on loans are much higher than deposits, so we can gain more than we can lose. However, it is worth considering some fees as most loans have some upfront costs. In this case, it makes sense to talk about repayment from your own money, as the goal is to avoid high interest rates.