If you are building or buying a house, it is important to know what mortgage rates are and how they will affect your purchase.
If it differs sharply, it will have a major impact on how much interest costs the loan will be. When planning, it is also important to keep track of the various important concepts that exist. We will address some of these here.
If you want to find the mortgage rates for a number of the banks that offer this kind of loan, you can do this here on the loan. Then visit our site where we compare mortgages. There we compare the interest rates of all the major lenders who act on the Swedish market.
Concept to keep track of
Keeping track of these concepts of interest will mean that you will have more opportunities to make the right decision when you lend money to a home. By making the best decision you can, you will probably be able to save money. You can also feel confident knowing why you have your loan in a certain way and what it means.
Variable interest rate
The banks have different interest rates that you can choose from. Variable interest rates mean that you will not know in advance what level your mortgage interest rate will have during the entire time you have the money borrowed. Usually, the interest rate is only fixed for a period of three months. Which means that the variable interest rate is also actually a fixed interest rate only that it is for such a short period of time that you choose to call it variable interest rates.
The advantage of variable interest rates is that it usually becomes much cheaper than fixed interest rates. This is because the lender does not need to have the same security margin as the interest rate will change pretty soon regardless. The disadvantages are that if interest rates increase very sharply, it can become more expensive (historically variable interest rates are cheaper) and that you will find it harder to plan your finances since you do not know exactly how much you will pay in the future.
This means that variable interest rates are usually better suited for those who have a slightly larger margin in their finances. You can say that you should have a variable interest rate if you can afford it. Which means that the economy must be strong enough to withstand negative interest rate changes.
Fixed interest rate
Contrary to the floating interest rate, the fixed interest rate is fixed during the fixed term. You decide for yourself how long you will fix the interest rate (between 1 – 10 years). During this time, therefore, the interest rate is completely fixed, even though the variable interest rate would go up by several percent and thus become more expensive than the fixed rate you already have.
The advantage of fixed interest rates is that it becomes easy to plan your finances during the term of the bond. That you can feel confident knowing that the mortgage interest rate on your loan does not change no matter what happens.
The disadvantage is that it is usually more expensive with a fixed mortgage rate. Which means that fixed interest rates are best suited for those who have a slightly smaller margin and would not be able to cope with a sharp rise in interest rates. Then it is better to pay a little more but get more security.
Effective interest rate
When comparing rates from different lenders, it is very good to check what the effective interest rate is. This is the interest rate that is calculated if you count on all the costs associated with a loan.
Thus, the effective interest rate includes not only the ordinary interest rate but also things such as newspaper fees, organization fees and all other conceivable costs.
Both fixed and variable interest rates
One thing that is important to know is that there is nothing to say that the entire mortgage must be either fixed or movable. Without it you can divide it into several different parts. Maybe you want half the loan as variable, one quarter tied for five years and the last part tied for two years.