Fixed or variable interest?

Hello

We are currently building a house and will spend around EUR 400,000 on it. Half of that is equity, and the other half we will take out as a loan. Repayments will be around EUR 700 - 1000 monthly. However, in June 2015 we will receive EUR 330,000. With that, we will fully repay the loan! So it will run for a maximum of only 4 1/2 years. Now we have 2 offers:

[*]2.85% interest, annual special repayment possibility of EUR 20,000.
[*]Variable interest rate (currently 1.85%). Special repayments possible without limit. Should the interest rate explode, it can also be converted into a fixed rate (although then certainly higher than the first option).

Certainly the interest rate for 2) will rise at some point, but the question would be whether b) would still be worthwhile given such a short term. What would you do?

Hello werdebaun,

as a security-oriented person, I would choose a 5-year fixed interest period with a correspondingly fixed rate.

The financing could then look as follows:

200,000 EUR loan amount
2.60% fixed for 5 years (eff.: 2.63%)
6.00% repayment
1,433.33 EUR monthly rate
approx. 133,700 EUR residual debt as of 31.12.2015

Best regards

M. Thiemann