Real estate loan: what rate should you choose | Banque et Caisse d'Epargne de l'Etat, Luxembourg
17th January 2019

Real estate loan: what rate should you choose?

You've found your dream house, and all you have to do now is take out a housing loan with your bank. You're wondering whether to go for a fixed or variable rate. There are no right answers and no magic formula. Since no two properties are alike, your Housing Advisor is best placed to offer you financing solutions suited to your project and, above all, to your personal and financial situation. Still, there are some important differences between fixed and variable rates.

Comfort and stability

Fixed rates mean transparency and stability, because they do not change much throughout the loan term in which the mentioned rate is valid. This means you know the monthly instalments in advance, which makes it possible to set your budget in stone and predict outgoings over the long term.

Since interest rates are at historical lows right now, this option may prove tempting.

In the event of total or partial early redemption, this formula may entail the payment of an early-repayment fee and an indemnity.

Less predictable, but flexible

Variable rates offer greater flexibility, because they allow for early redemption at any time without charges. The monthly instalments are lower from the outset, but that is not the only benefit. Whereas the lent funds are paid into the customer’s account in one go with a fixed-rate loan, variable-rate loans are released bit by bit as the work or project progresses. In other words, interest is only owed on the portion of the loan already taken up.

However, the rate changes with the market rate and does not allow you to plan the expenses linked to your housing loan in advance. Monthly repayments could jeopardise your budgeting if rates increase.

Leaflet "Housing loan"

Leaflet "Housing loan"

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So what does this mean?

If you need to borrow over the long term but are still planning to carry out other projects in the years to come, fixed rates offer greater stability and predictability. Variable rates, however, could be useful for short-term or smaller projects.

If you are one of those people who cannot make up their mind, you should know that there is a type of hybrid housing loan that combines fixed and variable elements. With hybrid loans, there are no early redemption charges for the second part of the loan. Plus, since you pay back the majority of your interest over the first few years, you could still do well if the rate subsequently changes. In any event, you must always take into account your employment status and personal circumstances when taking out a housing loan.

Simulate your real estate loan!

Simulate your housing loan

Amount
500.000,00
min. 5.000 € - max. 10.000.000 €
Loan term

1
30

Nominal Rate

0
7

Monthly instalment

1816.45
42090.55

Summary

Amount of the loan
500.000,00
Nominal Rate
1,85 %
Monthly instalment
1.816,45
Annual Percentage Rate 
1,93 %
This simulation gives you an estimate of the monthly payments and is not binding on Spuerkeess in any way whatsoever. For a specific quotation, please contact one of our branches or fill in your online request.
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