Most people have doubts about the term of a mortgage and the fixed rate period. The fixed rate period is the period during which your interest rate is fixed. If you choose a 10-year fixed-rate period, it means you will pay the same interest rate for 10 years. So if interest rates rise currently, you will benefit from those low rates for 10 years. If the interest rate has gone a bit lower in 5 years, you won't benefit. You would have if you had chosen a 5-year fixed rate earlier. Then you could choose a new, lower interest rate at that time. Huidadost will explain more about the term of a mortgage and the fixed interest period.

What is the term of a mortgage and fixed rate period

Both the term and the fixed rate period are important indicators when deciding the type of mortgage and the type of mortgage advisor you prefer.

The term of your mortgage is the period of your loan. When you take out that loan (the mortgage), you decide that you will pay back the borrowed money within this period. For mortgages, this is usually 30 years. Based on the term, the monthly amount is also determined. 30 years is 360 months, so the net monthly amount is the total mortgage amount divided by 360.

Of course, you also pay mortgage interest over the total amount. However, as the remaining amount goes smaller and smaller, by replacing on a straight or an annuity basis.

Fixed-interest period mortgage

When you take out a mortgage, you have to choose a certain fixed interest period and the term of your mortgage. Usually, you can choose between 1, 5, or 20 years. During that fixed-rate period, the interest rate will remain the same. You are thus down with a contract with the bank. This means these interest rates are fixed during that period. If you look at a long period, you expect interest rates to rise further. This is because the bank has calculated a longer fixed-rate period. This means that the higher the interest rate. This is because the bank runs the risk that market rates could go substantially. On the contrary, if you think interest rates will go down in the future, you would do well to choose a shorter fixed-rate period. At the end of that period, you will then enter into a new fixed interest period, with perhaps a lower interest rate.

Difference between term and fixed-rate period

There is often confusion between the term and the fixed interest period of a mortgage. The official terms are therefore very similar: they talk about legal maturity and economic maturity. The legal term is the fixed interest period. The term is for the length of time, 5, 10 or 20 years. The economic term is the total period of the loan, within the period (usually 30 years), the entire borrowed amount plus the interest must be repaid.

Why a 10-year fixed rate or more?

When interest rates are low, many people choose interest rates fixed for 10 years or more. You can then have your mortgage fixed for a longer period.

Apart from what the current interest rate is, a longer fixed-rate period gives you certainly more security. You already know exactly how much interest you'll pay in the coming years. A longer fixed-rate period gives you more certainty about your monthly costs. If interest rates rise further, you won't be affected.

Choosing the fixed rate period and term of a mortgage

Usually, the shorter your fixed-rate period, the lower the interest rate you will pay. Still, a short fixed-rate period always means more risk. Suppose interest rates sharply, you'll feel the consequences immediately after your fixed-rate period ends.

If you expect the interest rate to fall, a short fixed-rate period may be advantageous. When choosing your fixed-rate period, a is a good idea to look at other factors besides the current interest rate.

When choosing your fixed-interest period, it is a good idea to look at other factors besides the current interest rate. The most important factors have been discussed below.

Your mortgage amount

Your mortgage amount is something to consider when determining your fixed-rate period. If your mortgage (relatively high) compared to your income? Then a short fixed-rate period can be risky. If interest rates rise afterwards, this will give you more monthly expenses during that period.

Expected interest rate developments

Expected interest rates may also play a role. Interest rates expected to fall in the coming period? Then a shorter fixed-rate period can be attractive. A rise in interest rates, then a longer fixed-rate period provides more security.

Term of a mortgage and fixed rate period