How to choose and combine loans

To buy, or buy and renovate an old building to be used as a dwelling you have the choice of several types of loan. You should therefore look at different ways of combining them.

  Interest rate: fixed or variable?

• Fixed: it is stated in your loan agreement but will not necessarily remain the same rate throughout the repayment period.

• Variable: the rate may go up or down in line with an index stated in the agreement. There may be a ceiling or floor limiting the extent of any interest rate variation. The duration of the loan and amount of monthly repayments vary accordingly. These days the "base rate" for "short-term rate" loans is around 3%, and may fall further to 2.5% by the end of 1999. There are no penalties for early repayment. The most reassuring option is the revisable rate capped loan.

 L'évolution du remboursement :

• set repayments year on year: throughout the repayment period, the monthly amounts payable - before revision in the case of a variable rate - are identical. This is safest solution if your resources are not likely to increase by much.

• progressively increasing repayments year on year: the repayments start lower at the beginning of the loan and increase by the percentage stated in the agreement. Please note, this option may be suitable if you are sure that your resources will increase in the future, but may be costly to you if this does not occur.

• flexible repayments year on year: the agreement allows for changes in the duration of repayment and amounts repaid, either up or down, depending on your income.

 Loan duration

The cost of a loan depends directly on its duration: the longer this is, the higher will be the overall cost of your loan.