Fixing your mortgage rate: how do you choose a fixed-rate period?

With your fixed-rate period you weigh the rate on offer against how long you want to keep that percentage. Fixing for a shorter period is usually cheaper, but you have to choose again sooner and you may often borrow less. Fixing for longer costs a little more interest, and in return you know for longer what percentage you pay. So compare three things for each period: the interest rate, your certainty, and your maximum mortgage.

What differs per period

The rate feeds through into your monthly payment. The lower your rate, the lower your monthly payment at the same loan amount. Fixing for longer costs 0.2% to 0.5% more interest, depending on the moment. That range is a general indication. For every period you are considering, request the rate proposal from your lender. It sets out the percentages for your situation, so you compare the offers you can actually choose from.

If you buy with NHG, a lower rate usually comes with it. How much lower differs per provider and per fixed-rate period, so you cannot include that difference in your comparison as a fixed amount. What NHG costs and delivers beyond that is set out in the article on a mortgage with NHG.

How many years do you want to wait before choosing a rate again?

During the period you choose, your rate does not change, whatever the market does. At the end comes a rate review: your lender tells you at least three months in advance which rate it will charge after that, and you choose a period again.

Your monthly payment can go up or down as a result. With a shorter fixed-rate period, a rate rise can reach your housing costs sooner. So ask yourself now: can you still pay your monthly costs if the rate rises by 1% or 2%?

Below ten years you may often borrow less

At ten years or longer, your lender uses your actual rate in the income assessment. Below ten years a minimum applies: the test rate (toetsrente), which the AFM sets each quarter. Of your actual rate and the test rate, the higher percentage counts. Only when your rate is below the test rate does anything change about your maximum: the assessment then uses the test rate, and you can borrow less.

That rule prevents a temporarily low rate from leading to a loan you can no longer carry at the first rate review. How the rest of that sum works is set out in calculating your maximum mortgage.

If you choose a short period because the rate is lower there, that can mean you are allowed to borrow less and cannot close the deal on the home. Ask your mortgage adviser which percentage they use in the assessment, and have them set the monthly payment and the maximum loan amount side by side per period. That shows you whether the cheaper rate actually gets you further.

Moving or repaying extra within the period

Moving or repaying extra during your fixed-rate period sometimes affects your rate or brings costs with it. What applies to you is in your lender's conditions and differs per provider.

Do you expect to move or repay extra within a few years? Take those conditions into your comparison of fixed-rate periods. Ask whether you can take the rate with you to a next home, how much you may repay each year without a charge, and when you do pay one.