Fixed rates for your quick home loans mean the rate of the loan is fixed at the signing of the loan and will not change unless you renegotiate your loan or if you pay in advance. Fixed rates are indexed to the OAT (Obligations Assimilable Treasury) ten-year bonds of the State french and 10 years.
Although the rate is fixed, deadlines may be adjusted over time. The loan can be:
- At constant maturity: the amount of monthly payments is the same throughout the term of the loan
- Maturing progressive: the amount of the monthly payments increase annually at a rate agreed at the signing of the loan. For example, you may decide that your monthly payment will increase by 2% per year. This makes it possible to reduce your monthly payments during the early years of repayment and then increase the advantage of increased revenue
- Flexible: you can, throughout the term of the loan, increase or decrease the amount of your monthly payment based on your income. In fact, the loan duration varies. These variations are of course strictly regulated.
Advantages and disadvantages
The main advantage of the fixed rate is that it is safe. You know from the outset the amount of your monthly payment and total cost of credit and regardless of market developments, the rate and duration of the loan does not change (unless you choose an adjustable loan). You can manage your budget more effectively.
In return, you do not have any lower rates and you may end up paying too much interest in relation to market conditions. In addition, the interest rate is higher than for a loan rate revision. Today, on average, there is a difference of 1.5 to 2 points with adjustable rates “pure” (without caps) and 1 point with adjustable rate disabled.
But the major disadvantage is that the penalty will be applied if you wish to prepay, which is common in case of resale of the property or if you receive large sums of money. Repayment penalties frequently reach 2 to 3% of outstanding principal to be repaid, which can be dissuasive. Get your quick home loans now.
