Interest on the foot
Interest is a compensation that a person or institution receives for lending money. Interest is paid by the borrower of the money. Consumers receive savings interest or pay interest on an account with a bank, also called debit interest. You can save money by keeping track of interest rates. Comparing interest has become easier because you can do this online. You will sooner or later have to pay or receive interest, for example your savings account or when you take out a mortgage loan.
More about interest
Another name for interest is interest or interest. This is the periodic fee that you receive. Which calculation is used to determine the interest paid? This is done on the basis of interbank interest rates. Distinction is mainly made between nominal interest rates and effective and real interest rates. The amount of interest is indicated as an annual percentage of the principal sum, if you divide this percentage by 100 you will receive the interest rate. Interest is usually no more than a few percent, but often changes in a certain period. For example, the interest rate may be higher on one occasion and lower on the other occasion.
Interest rates (why interest rates change so often, how you can negotiate better interest rates by going to different banks, difference between fixed / variable interest rates and which ones you take best in which situation)
Fluctuating interest rates
Inflation is the main cause of interest rates fluctuating. When there is high inflation, this also means high interest rates. The money is worth less and capital shrinks. The effect of this is determined on the basis of the real interest rate. The inflation percentage has already been collected. The level of this real interest affects the national economy. Because more interest means that there is less money for investments. With low interest rates, there is more room for companies to invest and they can use more money well. It is an incentive for the economy when you receive less interest. This is also the case with the housing market because with a low interest rate it is easier to take out a mortgage loan. As a buyer you can borrow more via a home loan when the interest rate is low. A low savings rate is therefore related to many opportunities for the (national) economy.
Fixed and variable interest
Choosing a fixed rate means that interest rates remain the same during the term of your mortgage. With this option, you know in advance exactly what your monthly costs are for the payment. Despite a rising interest rate, your monthly costs remain unchanged if you opt for a fixed interest rate. The other option is to opt for a mortgage loan with a variable interest rate. These types of loans are a lot cheaper than home loans that use a fixed interest rate. You can save a lot of money per month if you opt for a variable interest rate. Variable interest rates can also pose a risk. When interest rates rise, this means a higher monthly payment for you. You can reduce this risk by agreeing a maximum variation with your bank. The choice between fixed interest or variable interest is therefore not easily made. In recent years, a lot of people had bad luck when they relied on bank interest rate forecasts. It often happened that they were completely wrong with the prediction for mortgage interest.
Flexibility and preparation
With mortgage loans, the real saving lies in good preparation and the degree of flexibility. Interest prognoses often turn out to be dramatically incorrect, just think of the collapse of the US mortgage market. You are advised to be and remain flexible. Many borrowers who have not done this are stuck to expensive mortgage loans for the long term. You would do well to request different offers and to compare the interest rates. The flexibility and possibilities for mortgage loans vary widely. Always read the small print that states the possibilities for canceling the loan. If you opt for a variable rate loan, you can receive help from the government through certain legislation. The second year of your loan can only increase by a maximum of 1% compared to the original interest rate. For the third year of your variable-rate loan, this may only increase by a maximum of 2%. This means that large fluctuations can only occur from the fourth year onwards. By using a simulation for a home loan you can find out for yourself which form of interest is more favorable for you. Ultimately, it remains difficult to determine who makes the best choice when it comes to fixed or variable interest rates. For each borrower it is especially important that they assess their own risk. So you can see what you will have to pay in the worst case and whether you can bear these charges. The use of so-called intermediate formulas is also recommended. After all, the first years of paying off are the hardest. For example, you can opt for fixed interest for a period of ten years and then apply adjusted interest every five years.
Interest rate mortgage loan
To make your mortgage loan cheaper, there are some possibilities. There are conditional and commercial discounts. Conditional discount means that you can get a discount when you meet certain conditions. An example of such a condition could be that you have to take out a fire insurance to obtain the discount. The interest discount falls away when the conditions no longer apply. Commercial discounts are cheaper because you do not have to deal with certain conditions.
Sometimes a strategy with an interest rate that is not fixed is preferable. In times of recession and economic turbulence, interest rate forecasts become increasingly difficult. Mortgage loans with a fixed interest rate can also be experienced as negative. Especially if unforeseen circumstances occur in the work situation or in the event of a divorce. If you then also have to deal with a renting rate because you have to terminate the contract, the choice for the relevant credit agreement will still be very expensive.