Mortgage lending with 10 years fixed interest rate: advantages and disadvantages at a glance

Many home builders and homebuyers choose a real estate loan with a fixed interest rate of 10 years for their mortgage lending. Surprisingly, this is not, because it is a sort of classic: Almost all banks advise their customers to choose this fixed interest period.

Granted: In many cases, the 10 years fit very well and is, therefore, a sensible decision. Nevertheless, aspiring borrowers should be aware that both shorter and longer periods are possible.

A 10-year fixed interest rate is not always the perfect choice. Below we show where the strengths and weaknesses lie.

Benefits of a fixed interest period of 10 years

Benefits of a fixed interest period of 10 years

First, there is the offered interest rate security. For a period of ten years, the interest rate on mortgage lending remains unchanged. Anyone who decides on a high repayment and thus quickly repays his real estate loan (or at least redeems the lion’s share) need not be afraid of an increase in market interest rates.

The next item is the conditions. Longer fixed interest rates usually result in a higher interest rate. Since even small premiums can lead to significant additional costs, the 10-year fixed interest rate is all the more interesting.

In addition, the 10-year fixed-income period is incredibly prevalent, basically, there is no bank that does not offer it. The opportunity is to get many loan offers on the market and compare them.

Those who are interested in an extraordinary fixed interest period (all periods beyond 10, 15 and 20 years) will encounter significantly fewer financing offers on the market.

Disadvantages of a 10-year fixed interest rate

Disadvantages of a 10-year fixed interest rate

The aforementioned interest rate security is limited. For some households, 10 years may be significantly too short, especially if one starts with low eradication first.

Under certain circumstances, the residual debt continues to be relatively high after the interest rate period has expired. Then an interim rise in mortgage rates in the market could have extremely unpleasant consequences and even seriously jeopardize personal finances.

Another reason is the blanket advice to choose a 10-year fixed interest rate. Many too many bank advisors barely take their time for their clients.

For example, those who want to finance a building plot and only want to build it some years later will depend on the situation, make a bad decision with a 10-year fixed interest period. Perhaps a shorter period or even a variable real estate loan would be the better choice.

Alternatives for your mortgage lending

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Consequently, one of the biggest alternatives is to optimally adjust the fixed interest period to personal needs. Especially with long-term repayment, it may be useful to choose a longer period from the beginning.

When it comes exclusively to interest rate hedging, it sometimes makes sense to hold on to a 10-year fixed rate, but to take additional safeguards. A finely tuned Good Finance contract, which replaces the remaining debt later, may be useful, for example.

Would you like to know more about choosing the optimal fixed interest rate?

Our independent consultants are happy to assist you. We examine without obligation how your financing is best designed and which banks attract the best mortgage lending conditions. Your request is, of course, free and without obligation.

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