Housing

Which loan should I choose?

You will probably need a loan to buy or build your dream home. But which loan should you choose? And what kind of interest rate? And how will you pay it all back? To make it easier to understand, let us take a look at Sophie and Bertrand. They have their eye on a property for 200,000 euros, and want to take out a joint loan to pay for it.

Interest rates

When you borrow money, you pay interest on the amount borrowed. The interest is calculated as a percentage: the interest rate. For home loans, you can choose between fixed or variable interest rates.

  • Fixed interest rate: play it safe!

    A fixed interest rate does not change right up until the last day of the loan. Sophie wants to choose this interest rate, because it means they will then know exactly what they have to pay off each month.

  • Variable interest rate: a calculated risk

    A variable interest rate is adjusted at set intervals. Bertrand is prepared to take this risk, because the amount by which the interest rate can increase is limited, but it can in principle drop to 0%. He can opt for a plan with annual, five-yearly or ten-yearly revisions. Each scheme has its own maximum interest rate increase.

A loan for 200,000 euros over 20 years

They decide to compare one 20 year loan with a fixed interest rate, and one with a variable rate on a 1 + 1 + 1/3% maximum increase cap plan.

  • Variable interest rate (1 + 1 +1) : the interest rate does not change

    1st year: 2,75 %

    2nd year: 2,75 %

    3rd year: 2,75 %

    As of the 4th year: 2,75 %

    Maximum monthly repayment (EUR)

    1.080,58 €

  • Fixed interest rate

    1st year: 3,60 %

    2nd year: 3,60 %

    3rd year: 3,60 %

    As of the 4th year: 3,60 %

    Maximum monthly repayment (EUR)

    1.164,03 €

  • Variable interest rate (1 + 1 +1): interest rate increases to the maximum

    1st year: 2,75 %

    2nd year: 3,75 %

    3rd year: 4,75 %

    As of the 4th year: 5,5%

    Maximum monthly repayment (EUR)

    1.389,63 €

  •  

This data is provided for information purposes only. ING is not bound in any way to adjust or grant the stated loans or interest rates.

Conclusion

If Sophie and Bertrand opt for a variable interest rate and economic conditions are favourable, then they will pay 83.45 euros less per month than with a fixed interest rate. If interest rates do rise by the maximum amount, however, they will pay 225.60 euros per month more.

You can find more detailed information on this subject in our real estate brochure (PDF). You can, of course, also contact your ING branch directly for more information.

Loans and insurance go hand in hand, so Sophie and Bertrand opt for a combined rate. They then receive a reduction of 0.75% on the interest rate. To do so, they must meet the following conditions.

In practice

They must make 10 payments per month from their ING account.

AND

They must both take out outstanding balance insurance for 100% of the amount borrowed (Sophie takes out insurance for 100% and so does Bertrand)

OR

They must take out home insurance and joint outstanding balance insurance for 100% of the amount borrowed (e.g. Sophie 25% and Bertrand 75%).

Home loans

Home loans are loans intended for private individuals who are buying, building or performing large-scale renovations on a property for private use. The most common home loans are:

Sophie and Bertrand try to find what is best for them.

Sophie would like to opt for this kind of loan. It is the simplest and most popular option.

  • Maximum duration

    30 years

  • Interest rate

    fixed or variable

  • Repayments

    monthly repayments (capital and interest)

  • Availability of amount

    • as a lump sum when buying the building plot or property
    • in instalments when building or renovating a property

Bertrand is more tempted by this type of loan. They would then only pay back the interest during the term of the loan, and on the expiry date they would pay back the whole amount borrowed. This works out perfectly, because Bertrand has an investment which will be released in 10 years' time, just before the expiry date of the loan. Using this money, he will be able to pay back the full amount borrowed.

  • Maximum duration

    20 years

  • Interest rate

    fixed or variable

  • Repayments

    • fixed monthly payments (interest)
    • on expiry (capital)
  • Availability of amount

    • as a lump sum when buying the building plot or property
    • in instalments when building or renovating a property

Sophie's parents have bought an apartment on the coast. In order to be able to pay for this real estate project, they must sell their current home. Whilst their home is up for sale, they take out a bridging loan. Then they only pay interest until their house has been sold.

  • Maximum duration

    3, 6, 9 ou 12 months

  • Interest rate

    Fixed

  • Repayments

    • fixed monthly payments (interest)
    • on expiry (capital)
  • Availability of amount

    • as a lump sum

For smaller or energy-efficient renovation projects.

One year after buying their house, Sophie and Bertrand want to insulate the roof. A little later, they would like to replace the kitchen. They can opt for a renovation loan.

  • Duration

    6 months minimum

  • Interest rate

    Fixed

  • Amount

    2,000 euros minimum

Did you know…? If the refurbishment works will cost more than 50,000 euros, you are better off applying for a home loan.

Repayments

Every month you transfer an amount to the bank in order to pay back your loan. This amount consists of a capital part and an interest part. You can decide to pay off a fixed amount every month, or a variable amount.

Sophie would prefer to pay back the same amount every month until the end of the loan term (or until the review of the interest rate if they opt for a variable interest rate). Both the interest part and the capital part change, but the total amount of the monthly repayments does not.

For the first year, their repayment table will look like this:

Month Interest Capital Monthly
repayment
January 590 € 574,03 € 1.164,03 €
February 588,31 € 575,72 € 1.164,03 €
March 586,61 € 577,42 € 1.164,03 €
April 584,90 € 579,13 € 1.164,03 €
May 581,48 € 580,83 € 1.164,03 €
June 581,48 € 582,55 € 1.164,03 €
July 579,76 € 584,27 € 1.164,03 €
August 578,04 € 585,99 € 1.164,03 €
September 576,31 € 587,72 € 1.164,03 €
October 590 € 589,45 € 1.164,03 €
November 572,84 € 591,19 € 1.164,03 €
December 571,10 € 592,93 € 1.164,03 €

This data is provided for information purposes only. ING is not bound in any way to adjust or grant the stated loans or interest rates. This example is based on a loan amount of 200,000 euros repaid over a term of 20 years at a fixed interest rate of 3.60%.

Bertrand would prefer to opt for variable repayments. The capital part stays the same each month, but the amount of interest falls over time. Initially, they pay a little more per month, but at the end of the loan term they pay a lot less. Ultimately, they pay much less interest than if they were to opt for fixed repayments.

For the first year, their repayment table will look like this:

Month Interest Capital Monthly
repayment
January 590 € 833,33 € 1.423,33 €
February 587,54 € 833,33 € 1.420,87 €
March 585,08 € 833,33 € 1.418,41 €
April 582,63 € 833,33 € 1.415,95 €
May 580,17 € 833,33 € 1.413,50 €
June 575,25 € 833,33 € 1.411,04 €
July 579,76 € 833,33 € 1.408,58 €
August 572,79 € 833,33 € 1.406,12 €
September 570,33 € 833,33 € 1.403,66 €
October 570,88 € 833,33 € 1.401,21 €
November 565,42 € 833,33 € 1.398,75 €
December 562,96 € 833,33 € 1.396,29 €

This data is provided for information purposes only. ING is not bound in any way to adjust or grant the stated loans or interest rates.

If Sophie and Bertrand opt for the Bullet-loan or Bridging loan, they will only pay interest during the term of the loan. The capital is then repaid in one lump sum at maturity.

You can pay back a loan, in whole or in part, at any time. Repayments amounting to less than 10% of the capital can, however, only be made once per calendar year.

Each time you choose optional repayments, you must pay a reinvestment fee. The charge is equivalent to three months' interest. You do not have to pay this fee if:

  • the repayment is made via outstanding balance insurance following the death of the borrower
  • your loan is an ING Bridging Loan.
You now know enough about loans! What next?

You know whether you want to build or buy a property and you have a good idea of which home loan is best suited to your project. It’s now time to bring ING into the picture!

My loan in 5 easy steps