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Fixed rate

A fixed rate is the option with the greatest degree of predictability. The fixed interest rate applied to your mortgage is determined when you sign the contract. It will remain the same throughout the term of your loan and your monthly repayments will not change – giving you protection against potential interest rate rises.
Fixed rate

Benefits

This type of rate lets you know up front what your monthly payments will be for the entire term of the loan. This option gives you greater control over your expenses. A sense of security when it comes to your budget.

Fixed rate

Drawbacks

You will not be able to benefit from any reduction in interest rates and early repayment may be subject to charges. However, under certain conditions and subject to the bank's agreement, a fixed-rate loan can be transferred to another property when you move.

Variable rate

A variable rate loan adapts to changes in interest rates. The variable rate is determined by the bank when the loan is taken out according to its refinancing costs and the sales margin agreed on a case-by-case basis with each client. This rate can rise or fall throughout the term of the loan depending on financial market conditions.
When interest rates rise, the bank will adjust the rate applied to your mortgage accordingly. A rise or fall in the rate will therefore have a direct effect on your monthly repayments.
 

 

Taux variable

Benefits

This type of rate is flexible. It typically allows you to benefit from rate cuts and make early repayments without having to worry about charges or penalties, giving you greater flexibility.
Variable rate

Drawbacks

Interest rate rises can cause your monthly repayments to increase significantly. A variable rate is therefore a speculative choice as it makes it impossible to anticipate exactly how much your monthly repayments will be over the coming years.

Adjustable fixed rate

An adjustable fixed rate is an attractive offer that lets you additionally benefit from the security of a fixed rate over a set period.

At the start of the contract, you and your adviser will agree on an initial period during which a fixed rate is to be applied. At the end of this period, the rate will be subject to review and you will be free to choose a new type of interest rate in line with current market conditions (variable, fixed, adjustable fixed or any other type of rate available on the day you make your decision).

It is also possible to combine these various options by allocating different types of interest rate to each tranche of your loan.
 

 

Adjustable fixed rate

Benefits

This option allows you to play it safe for an initial set period. When the fixed rate expires, you will then be able to renegotiate all the terms of your mortgage. You can reduce the residual maturity, repay part of your loan free of charge, and renegotiate the interest rate – in line with the most advantageous option at the time as well as for the remaining term of your loan.

Adjustable fixed rate

Drawbacks

This type of loan is riskier than a fixed rate. There is no way of knowing how interest rates will change in the future, and your monthly repayments could rise along the way.

How do I choose?

Variable, fixed, adjustable fixed – each option has its own advantages and disadvantages that you will need to consider carefully before signing your contract.

When interest rates are at their lowest, a fixed rate is without a doubt an option worth considering, as you will benefit from an advantageous rate for the entire term of your contract. This type of rate also gives you greater control over your future expenses, which can be reassuring for people looking for security.

On the other hand, when interest rates are high, a variable rate may be the more prudent option: if interest rates were to fall in the future, your monthly repayments may be adjusted downwards when you review your rate. A variable rate is also encouraged if you plan to repay your loan early, which you can do without having to worry about charges or penalties. Please be aware, however, that this type of loan carries a greater risk than fixed-rate financing.

With its greater degree of flexibility, an adjustable fixed rate allows you to benefit from the stability of a fixed rate during an initial period determined when the contract is signed, while leaving you able to choose a different option in the future, which might interest you if you have career prospects or significant funds to invest in the short to medium term.
 

 

Conclusion

No matter how big your mortgage is going to be, you should always take the time to study the different credit options open to you. Your adviser can provide you with a range of detailed simulations that calculate your monthly repayments under a fixed rate, a variable rate or a mix of the solutions available. You can make several choices by allocating separate rates to different tranches of the same loan. A mortgage is a loan based on solutions that can be personalised according to your situation and your preferences. Talk to your adviser to find out more.

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Your devoted BGL BNP Paribas Team, 10/12/2024

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