Better fixed or variable rate? Choose the best mortgage


Whoever decides to take out a loan, surely asks himself whether a fixed rate or a variable rate is better, a choice that will have a considerable impact on the costs of the loan.

How does a mortgage work?

How does a mortgage work?


There are many types, but all are united by the fact that an interest rate will be requested on the loan, which constitutes the remuneration of the bank that provides the amount. The interest will be expressed by a percentage of the loaned capital and will contribute to quantifying the weight of each installment, as required by the amortization plan initially established. At the time of signing, however, it will be necessary to choose between a fixed or a variable rate: let’s see what are the advantages and disadvantages of the two options.

The choice of the fixed-rate implies that the interest charged on the loan will not change for the duration of the loan: the interest rate will always be the same. The main advantage of the fixed-rate consists in the stability and certainty about the costs guaranteed to the borrower: the value of the installments will already be established at the beginning of the loan and there will be no changes, given that the interests will always be equal. But be careful, this does not mean that all the installments will be of the same amount: this happens only if, independent of the chosen rate, the method of calculation is used in constant installments, but there are others that provide for payments with different amounts.

The disadvantage of the fixed-rate is shown instead when the reference indices on the financial markets fall below the rate established for the mortgage, making it more expensive than choosing the variable rate.

This is in fact calculated by linking it to the performance of some international reference rates


Among which the main ones are the rate. The first calculates the cost that the banks bear to borrow, while the second counts the expense to use the deposits of other banks. In both cases, the bank providing the loan will ask the borrower for a rate equal to the rate.
The variable rate is particularly convenient when international rates are low, allowing banks to finance themselves easily (we point out that in recent years the rate is at historic lows): however, we cannot control the fluctuations of these indices and if they should therefore increase, the borrower will be forced to pay more over time.

It is therefore difficult to establish what is better between fixed or variable rates: in general, it can be said that when the indices are expected to remain low, the variable rate can be a good choice, while if you prefer certain stability you can opt for the fixed. Finally, remember that the rate is not the only expense for the loan: consult the APR, which also includes ancillary expenses, excluding notary fees.

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