According to the economic moment of the country, banks offer mixed rates for mortgage loans. Will it be a good deal?From a few months ago, banks began offering the mixed rate for mortgage loans again. It is a clear sign of changes in the country’s economy. They expect that, in a few years, the rates will rise again a couple of points.
Some clients have expressed fear. Mixed rates and variable rates do not enjoy the best reputation.
However, this can be a good business opportunity .
What is the mixed rate really
The mixed rate is a mixture of fixed rate and variable rate : a part of the credit is calculated with a fixed rate (usually 5 or 10 years, depending on the period of the loan) and the rest is calculated at a variable rate; that is, the rate will be adjusted, year after year, to the market reference rate at that time, given by the Goodheart Bank of the Reserve of Peru for the management of monetary policy.
If you were taking a mixed-rate mortgage loan today, your scenario would look more or less like this:
Loan value: S / 180,000.00
ASD (Annual Effective Rate): 7.5%
Loan term: 240 months
Payment date of installment 1: December 15, 2018
Date of the exchange fee, December 60: 15, 2023
Variable rate for the first period: 10% (estimated)
From quota 60 to quota 72
Variable rate for the first period: %
The risk of the mixed rate
The bad reputation of the variable rate and the mixed rate has to do with uncertainty and risk.
At the time of taking the credit and receiving the disbursement, certain part of the business, the first period – the first five years -, the agreed rate and the monthly fee that will remain unchanged in those months are certain.
Then the uncertainty. It is foreseeable to assume a rise of a couple of points. But it is a question. The figure is not closed. It is waiting for the economic conditions and the measures taken by the BCR to control monetary indicators.
That is just the interesting thing about the business.
The financial market takes into account the variable “risk” and therefore offers you a fixed rate for the first period lower than that of a credit that is calculated at 100% with a fixed rate.
How much would you have paid from TEA if the credit were only at a fixed rate?
60 months at 8.50%
One point above.
Does the business suit?
I would like to have the magic wand to predict the future, and confirm without a doubt that the rates will not rise or rise very little. Such a possibility does not exist. What does exist is a knowledge of the products and the possibilities for customers.
Mixed-rate mortgage loans offer these possibilities:
- The first, of course, close a business of buying a property , which will be valued over time, which will result in investment.
- You will pay monthly installments for five or 10 years calculated at the best fixed rate in the market .
- You will have the opportunity to consolidate a good credit history for future business for five or 10 years .
- During the term of the credit, it will always be possible to review the business. If rates have dropped, a mortgage transfer will be very convenient . With this operation, the credit balance will be recalculated at a better rate and the monthly fee will be lower.
- It is very normal that customers, in five or ten years, improve their working conditions and their income is getting better. That is, your credentials will be safer and therefore you could obtain a different risk rating. That would help lower the rate.
Therefore, a mixed-rate mortgage loan can be a good business. Risky, yes. Almost all good business is.