Variable loan: construction financing without fixed interest rates

When is the variable loan suitable?

When is the variable loan suitable?

Due to its flexibility, the variable loan is always recommended when you need quick interim financing and know that you can quickly repay the remaining debt of the variable loan. It is not recommended as a long-term solution because its interest rate fluctuations make it unpredictable in the long term.

There are other types of home loans, such as the annuity loan, then the more reliable, better option. By the way, you can also combine both. In the following, we will show you what options the variable loan offers. The specified conditions apply provided that the portion of the variable loan does not make up more than 25 percent of your total financing.

Application examples for a variable loan

A variable loan offers itself in different situations. For example, if you are currently selling your old house to buy a new one, the money from the sale is usually not yet available when you need the financial means to buy a new one. This is a classic case for the variable loan: you can cancel it in full with three months’ notice and pay it off in full, without the bank charging you a prepayment penalty, as would be the case with normal mortgage lending.

Or you already know before buying your house that you will soon be able to use large sums, for example through an inheritance. With a normal annuity loan, you can usually pay in a maximum of 5 to 10 percent of the loan amount per year. That may not be enough for you. Then it would be a good idea to cover part of your financial needs with an annuity loan and part with a variable loan. You could then pay off the variable loan early through the inheritance.

Flexible alternative: the cap loan

Flexible alternative: the cap loan

If you do not only want flexible construction financing as an interim financing, the cap loan is an alternative to the variable loan. A variable interest rate is also set here, but with a certain restriction. With cap loans, you enjoy variable interest rates as an advantage, but at the same time, an upper limit protects you from the risk of massively increasing building rates. However, the financing bank pays for protection against rising interest rates by estimating a higher interest rate from the outset than with a fully variable loan.

The variable loan – a helper for the transition

There are always situations in which existing funds are not available – and then an interim solution has to be found. The variable loan is a good interim loan if you can already see when you will repay it. Due to the constant flexibility of interest rates, the variable loan can never be a permanent solution; a permanent annuity loan is more suitable for this. You can make a direct comparison with the help of our mortgage specialists. If you wish, they will show you exactly whether the variable loan suits you and together with you you will find an optimal real estate loan.