Refinancing

This Blog Post was originally published on adagia.org.

At the end of 2020, I was looking into refinancing the loan I got so I could buy the Apartment I'm now living in. A coworker recommended finance specialists nearby my workplace.

A few emails back and forth and I got a new loan at a way better rate than the old one.

Although both have variable rates, the old one was fixed between 1,75% p.a. and 5%p.a. if I remember correctly. The actual interest rate was based on the Euribor. To repay it would have taken me 25 years or 300 months (banks don't really calculate in years).

With the new loan, I've got a completely different approach. The interested rate is now solely based on the 3-month Euribor (currently -0,550%) with a bank top-up of 1%. Which currently means I've got an interest rate of 0,45%. The loan got a new lifetime of 35 years (420 months).

The main difference is that there is no upper limit for the interest rate, but I don't think the Euribor will change significantly upwards anytime soon. Especially as long with got a worldwide crisis going on.

However, I could go up anytime. My current hope is that I've got at least 10 years of inexpensive interest rates. Because in 10 years I can pay back a bunch of money on that loan. And the more I payback, the less capital there is to calculate interest on it.

Of course, the worst case would be that I lose the apartment, but I know I can always move back in at my parents home. Also, I know (because the finance specialists calculated it for me) that I can at least sustain a rise of the Euribor to 5% or even 6%. It would be hard, but doable.