How long should I fix my mortgage for?

After you and your mortgage advisor have found a mortgage that suits you perfectly, the next question arises: for how long should you fix it and at what interest rate? And there are quite a few options available.

The most important decision you will make is: will you opt for a variable or fixed interest rate? Whatever you ultimately choose, make sure to seek good advice!

To help you get started, below we’ll explain as thoroughly as possible the choices available to you and what factors you should consider.

Also read: What choices do you make when buying your first house?

Variable interest rate

With a variable interest rate, also known as short-term interest, the interest is linked to the market interest rate. The interest rate fluctuates during the term of your mortgage.

The interest rate changes during the term every month, quarter, or six months. So, you don’t know in advance what you will have to pay in interest next month. The mortgage interest rate is linked to the market interest rate and may rise or fall every month.

The advantage is that when the mortgage interest rate drops, you immediately benefit from it.

You can switch mortgage providers and mortgage types every month. You can also choose to fix the interest rate at the prevailing rate at any time.

A disadvantage is that you have no certainty at all. The interest amount can vary every month. So if the average market interest rate rises, unfortunately, your monthly payment will also increase.

Fixed interest

With a fixed interest rate, also known as a long-term mortgage rate, you lock in the interest rate for an extended period. This period can vary from one to thirty years.

The percentage that you lock in when you take out (or refinance) your mortgage does not change during the fixed-rate period. Do you want to break the fixed-rate period early? Then you will likely have to pay a so-called penalty interest.

At the end of the fixed-rate period, you will receive a new interest rate proposal to lock in the interest rate again for a certain period. You can agree to this, or look for better offers and potentially refinance your mortgage.

Is it wise to lock in your mortgage interest rate (for a long time)?

In a period of low mortgage rates, as has been the case in recent years, many people choose to lock in their mortgage interest rate for a longer time.

Consider, for example, locking in a mortgage interest rate for 20 years or even for 30 years. In this way, you can be sure that you can benefit from a low interest rate for a long time.

Do you like certainty and do you not want to be faced with surprises? Then it’s best to fix your interest rate for a long time. Then you can best fix your interest rate for a long time. You’ll be certain that your monthly expenses remain stable.

In a period of higher interest rates, people often opt for a shorter fixed interest period, for example, a fixed mortgage rate for 4 years or even shorter.

You have less certainty about future monthly expenses, but there is a chance that the mortgage interest rate will be lower when your fixed-rate period ends. Moreover, interest rates for short fixed-rate periods are often lower, allowing you to immediately benefit from lower monthly expenses. In this way, you can be cheaper in the short term. Whether this remains the case in the long term always remains uncertain.

Actually, fixing your mortgage interest rate is a sort of strategic decision.

You can opt for a longer period with certainty, but sometimes you also pay more.

If you choose the shorter period, you can benefit if the interest rate drops further, but even that is not guaranteed.

Therefore, consult closely with your mortgage advisor to determine what is or isn’t advisable in your personal situation. That’s because it’s different for everyone.

Is it possible to end a fixed-rate period early?

Ending a fixed-rate mortgage (without cost) is usually only possible once the fixed-rate period has ended. Obtaining a new mortgage midway is possible, but that process is referred to as refinancing your mortgage. In most cases, you will incur a penalty in such situations.

Even if you want to pay off the property all at once (for example, due to a large financial windfall), with most lenders, you will face a penalty. The bank has calculated on income for a certain period, and then suddenly there is a change.

An exception applies only when selling your home; then you can repay the mortgage in one go without penalty.

Consider future plans.

Whatever you ultimately choose, be sure to also carefully consider your plans for the (near) future.

For example, consider if you have a desire to have children, if your children will soon be attending college and if you want to contribute to that, or if you plan to quit your job to start your own business. In that case, you might be better off choosing a fixed interest rate that remains stable for a longer period.

On the other hand, you can also choose to fix your mortgage interest rate for a shorter period if you are at the beginning of your career. You anticipate that you will earn more in the future and can afford any larger increases in the market interest rate.

Nobel Mortgages

Nobel Mortgages can assist you in making the right choices when selecting your mortgage.

Do you want to know what specifically is the smartest and most cost-effective option for you? We’ll find out for you! Because we at Nobel Mortgages are here to assist you by providing high-quality financial advice and thinking along with you in every aspect. We always go the extra mile for our (potential) clients, truly analyze all possibilities and, when necessary, always think outside the box.

In this way, we ensure that we can achieve what others cannot. In other words, we are fully dedicated to helping you obtain the best mortgage or loan that suits you perfectly and, of course, aligns completely with your situation and preferences.

Do you also want an advisor who looks outside the box and really analyzes all the possibilities for you? Then contact our experienced and enthusiastic team soon.

We are available to you 24 hours a day with the utmost commitment and sincere attention. An e-mail is a snap to info@nobelhypotheken.nl or call or app to 06-54770122.