Mixed and tiered loans, new generations of effective loans?
Those who remember the Potato Cure may also remember the concept of a mix loan. It was a policy intervention that made it more expensive for homeowners to take out mortgages. Now we are introducing a different kind of mix loan to cooperative housing associations, but with the aim of making it cheaper to borrow.
When a cooperative housing association restructures loans, interest expenses fall and at the same time the repayment of the debt rises.
What is a mixed loan?
If we already know the fixed rate and variable rate loan formulas, the mixed loan, as its name suggests, combines the two types. As soon as you sign this type of loan, it is therefore possible to choose how many years you will opt for fixed rate repayments and then move on to an adjustable rate. Generally, the first phase at a fixed rate is at least ten years, which very often makes it possible to benefit from a more advantageous rate than a credit with “traditional rate”, of a longer duration. Arrived at the end of this first period, it is then a question of switching to the credit taken out at variable rate. It will go down or up depending on the short-term interbank market rate.
Given the ambient uncertainty, and as few experts are betting on lowering rates, this type of “mixed” credit is advantageous when you are almost sure to resell your property before switching to the rate formula. variable. It is estimated, for example, that first-time buyers will stay in their first home for around seven years. It is indeed a question of being informed of interest rate variations, likely to skyrocket, and of not being cornered by excessively heavy monthly payments.
And the tiered loan?
The step loan can be very similar to the mixed rate loan, with some significant loan details. It is a loan in stages of repayments, the amount of maturities of which varies according to predetermined periods. The borrower therefore has the possibility of determining different amounts of maturities per period: the stages.
The banking establishments which offer it thus allow the beneficiary to divide the loan in question into two lines of credit, with the aim of lowering the average rate. This type of loan also makes it possible to “smooth” the monthly repayments in the event that the borrowers have several credits in progress or, in particular, in anticipation of future debts. Please note, however, the reimbursement levels are fixed in advance when the contract is taken out and cannot be modified during reimbursement.