Floating or floating rate: A variable speed is a speed that moves up and down with general market trends. This set of loans and deposits usually either on the 3rd, 6th or 12 months or up to every 10 years. Loans with variable interest rates are also called an adjustment, because the interest rates are adjusted regularly. Floating rate loans:
Benefits of floating interest rates:
Typically, you will have a lower interest rate on the loan than with a fixed rate loan, and therefore, lower performance. When interest rates fall, the service automatically reflects this. The lower the interest rate means that people are beginning to repay relatively more on the loan compared to a similar loan with the same maturity and with a (higher) fixed rate.
Variable interest rate risk:
The interest rate on a variable rate loan is adjusted regularly and there is no upper or lower limit. This means that it depends entirely on the market and there can be uncertainty in it. To minimize the risk of rising interest rates, there are various products with interest rates so that the interest rate can never be higher than the ceiling agreed with the bank or mortgage institution.
You can choose partial interest loans, so that only parts of the loan are adjusted at each maturity.
The starting point is a loan with an interest rate before maturity of 4%, and the market is at 5% of the adjustment time. In an adjustment to full maturity each year (so-called F1 loans), the loan becomes interest rate in the coming years, at 5%. On an adjustment loan with a 30% partial interest rate adjustment each year (a so-called P30 loan), the interest rate for the coming year is 4.3% (0.30 * 5% + 0.70 * 4%).
If we change the premise from renting a home to owning a home, the result would be somewhat different. The status after the end of the debt settlement period would then be a mortgage at the equivalent of the value the home was valued at the beginning of the debt settlement period.