Interest rates on loans, including mortgage rates, have reached historical lows, which means we can take them at extremely favorable rates right now. Because buying real estate is an extremely stable investment opportunity, borrowing should be considered for this reason.
Currently, we can get a home loan at an average interest rate of 5.57 percent, but there are significant differences between offers per bank and depending on the interest period . The latter is one of the most worthwhile deals to look at.
What is an Interest Period?
Anyone applying for a home loan must become familiar with this concept, as banks periodically recalculate interest rates.
For example, for a 15-year period, you can recalculate the interest payable on 3 different contracts every year, every three years, and every five years.
This means that for a period of one, three or five years, we know how much we will repay each month, and then a new, unpredictable situation will arise, which will be calculated as the sum of the floating base rate plus the interest premium on the Interbank Offered Rate (BUBOR). That was a long sentence – the point is that from time to time our interest rate will also adjust to the current interest rate (or government bond yield).
Interest rates can also be raised by the lender
What happens if we don’t want this? Then we have to choose a fixed rate home loan. Experts generally recommend this as the most stable, pitfalls-free solution, but it is always the highest interest rate loan offer out of all.
How much does a fix cost?
It is worth noting that there are no such overlapping differences between the types of loans recalculated for shorter periods and those that have been “concreted” for a longer period. It is worth thinking about whether security is worth a few thousand forints more than the temptingly low starting amount.
For example, if you take the risk, a three-year fixed-rate loan from K&H Bank, with a APR of 4.36 percent, is very favorable among short-term loans.
If we were to pay a modified interest rate to another bank after five years, we would start with a APR of 4.76 percent. However, a fixed interest rate will cost us a lot more from the start – but it does not involve risk in the event of a change in exchange rates.
It’s a good idea to check every bank’s offer, because that’s the only way we can find the best deal for us.