Financing Land & House - 2 Different Loans

How is it regarding the fixed interest period for the variable loan? At what intervals can the interest rate change? Is there a short-term fixation of at least a few weeks/months? The interest rate is based on the Euribor, right? So one should have a 3-month fixation here?

Common are 3- or 6-month fixed interest periods. You can also repay the loan free of charge at each fixed interest period. If you also take out the fixed-rate loan with the same institution, they will certainly repay the variable one at the same date. Since there is no interest rate change risk with variable loans, the conditions are currently very favorable. However, this is hardly a calculable risk for several years. It would be important for you that the interest formula is specified exactly so that you can understand the interest adjustment. The underlying reference interest rate (Euribor3M or Euribor6M) must be stated as well as the fixation date. From 2021, the Euribor no longer exists as such. Then the interest fixation takes place retroactively...

From 2021, the Euribor will no longer exist as such.

More precisely, from the end of 2021 – it must first be replaced by a new reference rate on 01.01.2022. However, this should already be taken into account in the current loan agreements (at least in our case, since we do a lot on a variable basis).

Had an interesting financing conversation at a local bank yesterday and learned the following:

- According to the financing advisor, a variable loan makes no sense at all because the interest rate is significantly higher than the interest rate of an annuity loan with a fixed interest period between 1 and 2 years.
--> Variable interest rate: 2.2%
--> Annuity interest rate: 1.25%

Furthermore, the gentleman said that it is no problem to refinance the loan with 1 or even 2 years fixed interest period easily through another bank. So, I don't have the problem with the first-rank land register entry either. Is that correct? Why does anyone these days even take a variable loan then?

Everyone always talks about variable loans here, which, according to the financing advisor, makes no sense to me at all.

What do you think?

Why does anyone take out a variable loan nowadays at all? Everyone always talks about variable loans, which, according to my financial advisor, makes no sense at all.

Only for the sake of flexibility. If one year fixed fits well, then gladly with fixed interest. If planning time is between 12 and 36 months, then variable.

Just for the sake of flexibility. If a fixed period of one year fits well, then gladly with a fixed interest rate. If the planning time is between 12 and 36 months, then variable.

However, the advisor also offered us a fixed term of 1 1/2 or 2 years with an interest rate of 1.25%.

So why then variable at 2.2%?? That doesn’t make any sense, does it? I don’t have a single advantage here, do I?

Why then variable at 2.2%?? Doesn't make any sense? I don't have a single advantage here, do I?

Yes, if you fix it for two years and realize that in three months you want to do the big overall financing at another bank = prepayment penalty, provided the bank even allows you to repay the small loan (they don't have to and can freely set a price for this!). If your schedule is actually fixed, you can safely lock in. But with 2.2% you have also gotten a "good" rate...