Good Finance rates have begun to rise, which may also increase the repayment installment on home loans, so ultimately you have to pay more for the home you buy.
A 20-year floating rate mortgage loan of $ 10 million may cost up to $ 0.5 to 3.5 million more than a fixed-rate facility in the event of a significant increase in interest rates. The total amount spent on the purchased property may increase even by HUF 7.2-10 million even years after the sale due to the increase in interest rates.
On the other hand, mortgage loans with a fixed installment until the end of the term provide protection against interest rate risks.
In the case of floating rate mortgages
the installment may increase following the increase of the 3-12 month Good Finance interest rate, BUBOR. And rising mortgage rates and installments also affect the housing market, as more than 40 percent of home purchases are accompanied by borrowing.
A possible further increase in the interest rates on floating rate mortgages may lead to an increase in the total amount paid on the home, but mortgage loans with fixed installments until the end of the term provide protection against interest rate increases, according to the latest analysis by real estate.com and BankRáció.hu
Floating rate loans can become very expensive
A 20-year $ 10 million loan to buy a $ 30 million real estate property is currently available at a floating rate of 2.1 percent interest rate . If the interest rate remained unchanged, a total of HUF 12.2 million would have to be repaid. However, the interest rates on these loans are almost certain to change and the current low level is expected to increase . For example, if the interest rate of the loan rises to 7 or 8 per cent over the entire term, the amount repayable may be as high as HUF 17.2-20 million.
However, interest rate risk is protected by predictable home loans that guarantee a fixed installment until the end of the term. In the above example, the most favorable ones can be claimed with interest below 6 percent, and the total repayment is guaranteed at HUF 16.6 million.
An increase in interest of $ 10 million may also result
A leading financial expert at real estate.com, also pointed out that rising interest rates could significantly increase the price of homes even years after the sale. “Many people are still calculating that for the $ 30 million real estate for sale in this example, they will pay a total of $ 32.2 million over 20 years if they buy a $ 10 million floating rate loan.
If, on the other hand, rising from 2.1 percent today to 7-8 percent, it also means that total spending on real estate can increase from $ 32.2 million to $ 37.2-40 million, but those who fix their current interest rates over the entire term and installments, the same property is guaranteed to be paid only $ 36.6 million over 20 years.