Variable-rate mortgage

The variable-rate (or adjustable-rate) mortgage offers large flexibility as it has no fixed term. Twenty years ago it was the most common financing form for residential property. Today it is less sought after. The high flexibility offered by the variable-rate mortgage has its price – it is the most expensive financing form. Furthermore, the adjustment of the interest rates is not regulated as clearly as with the Libor mortgage. There is therefore no absolute guarantee that decreased rates are immediately passed on.

Advantages

• Can be terminated at any time if the agreed notice periods are respected.
• Suitable for short-term financing of residential property, for example if the sale of property is due soon.

Disadvantages

• Rather expensive, especially when interest rates are low.
• The pricing is usually not transparent.

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