Fixed vs. Variable (Adjustable) Mortgage Rate – A substantial monetary question that can have a serious effect on your life. The set home mortgage rate is usually the more costly at first but is the sure thing over the entire period. On the other hand, the adjustable or variable mortgage rate is cheaper in the beginning and if interest rates decrease, can even get more less expensive. However, if rate of interest spike, it can get a lot more expansive.
We discuss examples, numerous circumstances so that you can make the best decision for you over the period of your mortgage.
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0:00 Fixed or Variable Home Mortgage Rate.
1:33 Predictability of Rates.
5:16 Inflation.
5:45 Scenarios For Decision.
8:06 My Take.
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Thank you
J’ai allumé cette vidéo au travail et maintenant mes collègues rient aussi. C’est une excellente façon de passer la pause déjeuner💖
Historically variable interest rates are advantageous 80% of the time.
but how realistic is a 10% interest rate if the national debt keeps going higher? the governments would be bankrupting themselves at those rates. You dont need to be ironclad, you just need to be more solvent than the big governments around the world. Go variable
I guess that there could be the situation that the countries of the EU continue with their high deficits, nobody wants to buy their bonds and the money printer needs to go brrrr so the ECB buys them. This will cause high inflation (imagine a scenario of 15% inflation) and they would need to raise rates to 10%. This would destroy the currency and make your mortgage payment a hell.
No way man… that’s playing with fire
You will run out of your money before the government runs out of your government
Before viewing the video; your previous videos about mortgages have given me the information and conviction to dive into renewing our mortgage and acting on it. Everybody thought it was such a weird thing to do. The adviser had to put in black and white that what we wanted/ signed for wasn’t as adviced. Because apparently our wish was very weird in a ‘low interest rate forever-environment’.
But after re- and rewatching Sven’s videos about mortgages and also about how money/ debt works (also for governments) the result is this: a 30 year fixed rate of 1.87 percent. For 65 percent of the total amount we are only paying interest. So 65 percent of the total mortgage amount we have to repay after 30 years. The other 35 percent will be payed during those 30 years.
The timing was very lucky. But the outcome is ‘ok to good’, no matter external factors like future interest rates etc.
The contrarian mindset that Sven offered has carbed my brain deep. Plus the peace that the fixed rate will be giving us through good and bad years is so fantastic to have.
For that my family and I thank you Sven, from the bottom of our heart.
This the essence of value investing! Acting when the opportunity shows itself!!!
For clarification to anyone wondering; our choice would result in a penalty of X-amount. To me/ us that was worth it and what fitted us. Therefore calculations of the future costs (on future rates pulled out of the blue) were worse according the advisor.
The lucky part was that the penalty melted away because of our lucky timing during changing interest rates. So that part already went from ok to good.
@@Value-Investing really appreciate this comment, it means a lot to me. In itself a sign that I still have a long way to go in self independency, on the road to contrarianism 😅
Of course I envy the countries where there are 20 to 30 year fixed mortgage hah ha. In Canada the longest fixed is 5 year. Bleh!
In Europe you can renegotiate the mortgage if the rates are going lower, perhaps also in US. I would take a BE mortgage fix 25y 2,9% and renegotiate if the rates go to 1-1,5%. Hopefully it will happen the next 10y. In US the dilemma is more complex now.
Thanks for your insights. Personally I follow your thinking, I like to stay safe on my home (even if I pay a premium), and take more risk in investing
I don’t know if it’s possible, but why not an hybrid approach? Get part of it fixed, and another one variable. Then later if rates go down, you start converting them to fixed. It’s like with stocks: you buy them in tranches during dips
Please cover Verallia(VRLA), the boring glass maker
in spain, now, 2.5% 30 years fixed are back!
Wow… 2.5 for 30y is too good to be true
I got a 15 year fixed interest rate at 1.1%.. just got a letter from my bank offering me free unlimited special capital repayment.. why would I even do that to save 1%, if I can get 3% by just having them in the bank account.
Neighbor of my parents chose variable rates because he thought it was cheaper. But then rates exploded, his wife left, he lost his house and committed suicide. Always choose fixed rates!
I think he rated the value of his own life a bit too low… 😣
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🗽 Two times I had a leasing car, but the rate was fixed! today I’m 100% in equity. ✊
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An interesting way to reframe this question is: if you were renting an apartment, would you pay $138/month (in insurance) to eliminate the possibility of a rental increase eviction?
i recently took a loan for an investment property : variable rate (2,8% for 20yrs).
The way i see it, when rates go up, that means higher inflation, which means faster rising rental income.
As the principal goes down future increase in intrest payment will be less then the increase in rent.
intrest payments are also tax deductable, which make them hurt less.
What is the error in my reasoning here ?
You can’t wait for 6 more months for the rates to go even lower and then buy that house on a 2% fixed rate. In România we have 12% now, variable rates only, and that sucks. Is not a big jump in the ammount we pay montly, but is huge over 20-30 years period.
I am truly amazed this is even a question or discussion. Go fixed and toss adjustable into the category of “things I no longer think about”.
In Belgium you can renegotiate your interest rate whenever you wont. You’ll only need to pay a fine of (3 months of interest) to the bank to receive the lower interes rate on the duration of the loan.
So go for the fixed one, if after 2 years rates are 1% lower just renegotiate your loan.
My god. Always fixed! And pay in advance as much as you can.