In the case of a fixed loan, also known as a final loan, the remaining debt is repaid in full at the end of the term. This form of loan is secured by an adequate investment.
A fixed-rate loan is therefore not a fixed-rate mortgage (real estate financing with fixed interest rates): the debtor only pays interest and a small part of the repayment during the term.
The loan is mainly worthwhile for investors, not for owner-occupiers of the property.
For a fixed loan, the borrower (debtor) only pays the interest or a repayment rate.
However, the bank does not receive this repayment directly, but the money is paid into fixed-interest securities or an equity fund.
At the end, the remaining debt is then settled from these.
- Ideally, through a very positive interest rate development, the assets saved in securities or funds can exceed the value of the remaining debt, so that the borrower posts a profit.
The debtor himself only has to pay the loan amount in the form of a one-off payment at the end of the loan term. A life insurance policy that is due for payment or a fund savings plan serves this purpose.
Variable interest rates can be agreed for this type of loan and the borrower decides to set interest rates for 5, 10, 15, 25 or 30 years. Fixed-rate loans with fixed interest rates can only be terminated early if special repayments have been agreed in advance.
Fixed-rate loans with a variable interest rate can be terminated by either side at any time, subject to the three-month notice period.
Building loan or loan applied for in this form.
Advantages and disadvantages