Are you planning to buy a property? Then you must have asked yourself many questions about financing your future purchase!
One of the most common questions is whether to use a fixed or variable rate, which is a determining factor when taking out a mortgage. What are the differences?

The fixed rate

A fixed-rate loan is a loan where the interest rate, and therefore the monthly repayments, will remain the same throughout the life of the loan.
The characteristics of the fixed-rate loan are as follows:
- the interest rate is fixed
- the total cost of the loan, the sum of the interest paid to the bank, is controlled
- the duration of the repayments is known when the loan is signed
- the amount of the instalments is constant
Overall, by choosing a fixed rate, the buyer knows from the outset all the elements that will make up his real estate loan.

The variable rate

In the case of the variable rate loan, the total amount of repayment to be made for the loan may vary. 
In fact, the interest rate of the loan fluctuates according to a reference index determined when the loan is taken out. Banks will generally index their loans to an index, such as EURIBOR (Euro interbank offered rate).   
In other words, the monthly repayments will change according to the interest rates, either up or down. With the variable rate, the total cost (sum of the interests) is not known in advance, since it is influenced by the index, to the borrower's advantage or disadvantage.

Adjustable rate

Faced with the dilemma of fixed versus variable, there is an alternative that allows both types of financing to be combined. This is called the adjustable fixed rate loan (or semi-fixed rate).
You start repaying at a fixed rate, which will be converted to a variable rate after a few years.

The interest rate is usually fixed for a defined period (3, 5 or 10 years). During this period, the interest rate remains unchanged, which makes it possible to foresee exactly how much money will be repaid. At the end of the chosen period, the interest rate is reviewed, and can be fixed again for a given period, or replaced by a variable rate.

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