There are big differences in the repayment of similar types of home loans, depending on which option applicants choose. The monthly repayment of the HUF 10 million home loan can be HUF 41 thousand and HUF 87 thousand, depending on the choice. This is a very significant monthly difference, so many people are opting for a better rate. Do you think what the price of a super low repayment will be in the future?
Let’s look at realistic comparisons of hundreds of products from over 30 banks and financial services, summing up expert judgment!
Who counts only the monthly installment:
- Those few things are better to be aware of before signing a contract, as an interest rate increase can ruin everything!
- What are the chances of a debtor with a $ 10 million loan, how are his monthly payments going with rising interest rates!
Short interest period, long maturity
Short-term floating rate home loans have an unbeatable low initial repayment, but have a 30-year maturity, with a starting monthly payment of $ 41,500 (with a monthly income of $ 250,000), which may seem very favorable. However, there are hidden dangers to keep in mind!
- Duration, may be up to 30 years
- huge amounts of interest over the years,
- in addition to the $ 10 million withdrawn, you have to pay back $ 4.4 million plus during this time!
- The initial interest rate is very favorable, only 2.46%.
Shorter term, similar conditions:
If we take a home loan at the same interest rate for 20 years, we only have to pay $ 2.8 million after 10 million HUF. The monthly repayment here is already 52 800 HUF.
Interest on the loan:
- depending on the length of interest periods, it can change every few months, every year, or even every 10 years. There are also schemes where interest is fixed throughout the term.
- In general, the longer the interest rate is fixed, the less risky a loan is. In other words, the client will be able to plan further with unchanged monthly repayments, while remaining somewhat secure.
“In the opinion and experience of the MNB, loans with a maturity of less than 5 years are the most risky, loans with a maturity of 5 years or longer but less than 10 years have a medium risk, while loans with an interest rate of 10 years or longer are the most secure.” !
How Much Can Creditors Deliver?
The central bank base rate has been at historic lows of 0.9% for some time, but analysts say it will rise at the end of 2019, and in parallel, lending rates may rise. This will appear in the monthly installments at the end of the interest periods, so the longer the interest period, the later the higher interest rate prevails.
As of October 1, the rules for new home borrowing have become stricter.
- “The repayment installment for a fixed installment of less than 5 years and a variable rate mortgage loan shall not be higher than 25-30% of the monthly net payment.
- In the case of fixed-term home loans for 5 and 10 years, the new rules set limits of 35% and 40%, which are now 50-60%
- modification of home loan agreements and redemption of loans, if the interest period of the new loan is longer than before. ”
The above example is a low repayment term loan of 30 years with a fixed interest rate of 3 months. Its 2.46% interest rate is very low, with similar interest rates already above 12% in 2009 and 2012. Before we start wondering, it is good to know that repayments and interest rates are related. It is not possible to predict in advance, but if interest rates rise by a few percent for 30 years, we can even get out of sight!
When is a Short Term Loan Good?
- If you know in advance that you will pay off the loan in the short term, it is not a good idea to fix the interest rate for the long term as the increase will no longer affect it. This may be the case if several home savings plans expire soon or there is savings, but you can access them later. Higher monthly repayments, but short duration.
- Early purchase on the real estate market can be a good decision, because today we can safely say that buying property in the right place and at a good price is still a good investment, even on credit.
And what’s the medium?
- An intermediate solution is to have loans with a 5-year interest rate, as they are slightly more expensive than those fixed for a few months. Here the most optimal interest is 3.65% interest, which is a monthly payment of HUF 46,000.
And what is the role of leaving VAT?
The government’s new proposal has absolutely no effect on the mood to buy new homes, since, due to its “retroactive nature”, it only applies to dwellings with a valid building permit and has no effect on new investments! According to experts, this retention of VAT does not stimulate the real estate market, it only gives time, a loophole for investors who have slipped over time to complete their construction, and this measure is not expected to increase the number of buildings.
If you have a home business, would like to take out a home loan, are interested in your options, or you may have been interested in GFIC changes, call our credit broker to help you make a professional decision!
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