Which loan should I choose?

• 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

• 1^st year: 2,75 %
• 2^nd year: 2,75 %
• 3^rd year: 2,75 %
• As of the 4^th year: 2,75 %
• Maximum monthly repayment: 1.080,58 €

• Fixed interest rate

• 1^st year: 3,60 %
• 2^nd year: 3,60 %
• 3^rd year: 3,60 %
• As of the 4^th year: 3,60 %
• Maximum monthly repayment: 1.164,03 €

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

• 1^st year: 2,75 %
• 2^nd year: 3,75 %
• 3^rd year: 4,75 %
• As of the 4^th year: 5,5%
• Maximum monthly repayment: 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 mortgages 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 an outstanding balance insurance for 100% of the amount borrowed (Sophie takes out insurance for 100% and so does Bertrand)

OR

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

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 installments 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

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.

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.