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# The Impact of Rates on a Mortgage Loan

February 6, 2019

With low rates , many borrowers are quick to buy real estate , whether for a principal residence or a rental investment project. Money does not cost much and operations can be very profitable. What about the real gain obtained thanks to a low rate ? We decided to offer you different cases to realize it

We decided to present this case study as follows:

- A loan of 200 000 €
- With a base rate of 1.5% (nominal loan rate)
- Of a duration that we vary from 10, 15, 20 and 25 years
- The variation will be each time 0.1%, 0.5%, and 1% in order to assess the impact of a rate difference

SUMMARY

- 1 The cost of the loan from € 200,000 to 1.5%
- 2 Impact of rates on a loan of € 200,000
- 2.1 Plus or minus 0.1%
- 2.2 Plus or minus 0.5%
- 2.3 plus or minus 1%

- 3 Result of the case study

## The cost of the loan from € 200,000 to 1.5%

The total interest cost of the loan from € 200,000 to 1.5% is as follows depending on the duration:

- 10 years: € 15,500
- 15 years old: € 23,468
- 20 years old: € 31,622
- 25 years old: € 39,961

We note here that, for the same rate, the duration has an impact on the cost of your credit. The longer the loan, the more interest there is to pay.

## Impact of rates on a € 200,000 loan

### More or less 0.1%

#### Total cost of interest over 10 years

- 10 years at 1.5%: € 15,500
- 10 years at 1.6%: € 16,559
- 10 years at 1.4%: € 14,444

On a 10-year loan of € 200,000, a 0.1% rate difference will result in a change of approximately € 1,000 in the total cost of your loan.

#### Total cost of interest over 15 years

- 15 years at 1.5%: € 23,468
- 15 years at 1.6%: € 25,092
- 15 years at 1.4%: € 21,850

On a loan of 15 years to 200 000 €, a difference of 0.1% rate will cause a variation of about 1600 € on the total cost of your loan.

#### Total cost of interest over 20 years

- 20 years at 1.5%: € 31,622
- 20 years at 1.4%: € 29,421
- 20 years at 1.6%: € 33,837

On a 20-year loan of € 200,000, a 0.1% rate difference will result in a change of approximately € 2,200 on the total cost of your loan.

#### Total cost of interest over 25 years

- 25 years at 1.5%: € 39,961
- 25 years at 1.6%: € 42,790
- 25 years at 1.4%: € 37,153

On a loan of 25 years at 200 000 €, a difference of 0.1% will result in a variation of 2800 € approximately on the total cost of your loan.

### More or less 0.5%

#### Total cost of interest over 10 years

- 10 years at 1.5%: € 15,500
- 10 years at 2%: € 20,832
- 10 years at 1%: 10 250 €

On a loan of 10 years to 200 000 €, a difference of 0.5% rate will result in a variation of about 5000 € on the total cost of your loan.

#### Total cost of interest over 15 years

- 15 years at 1.5%: € 23,468
- 15 years at 2%: € 31,664
- 15 years at 1%: 15 458 €

On a loan of 15 years to 200 000 €, a difference of 0.5% rate will result in a variation of 8000 € about the total cost of your loan.

#### Total cost of interest over 20 years

- 20 years at 1.5%: € 31,622
- 20 years at 2%: € 42,825
- 20 years at 1%: € 20,750

On a loan of 20 years to 200 000 €, a difference of 0.5% rate will result in a variation of about 11000 € on the total cost of your loan.

#### Total cost of interest over 25 years

- 25 years at 1.5%: € 39,961
- 25 years at 2%: € 54,313
- 25 years at 1%: 26,122 €

On a loan of 25 years to 200 000 €, a difference of 0.5% rate will cause a variation of about 14 000 € on the total cost of your loan.

### More or less 1%

#### Total cost of interest over 10 years

- 10 years at 1.5%: € 15,500
- 10 years at 2.5%: € 26,248
- 10 years at 0.5%: € 5,084

On a 10-year loan of € 200,000, a 1% rate difference will result in a variation of approximately € 10,500 on the total cost of your loan.

#### Total cost of interest over 15 years

- 15 years at 1.5%: € 23,468
- 15 years to 2.5%: 40 044 €
- 15 years at 1.5%: € 7,635

On a 15-year loan of € 200,000, a difference of 1% will result in a change of approximately € 16,000 on the total cost of your loan.

#### Total cost of interest over 20 years

- 20 years at 1.5%: € 31,622
- 20 years at 2.5%: € 54,354
- 20 years at 1.5%: € 10,209

On a 20-year loan of € 200,000, a 1% rate difference will result in a variation of approximately € 22,000 on the total cost of your loan.

#### Total cost of interest over 25 years

- 25 years at 1.5%: € 39,961
- 25 years at 2%: 69 169 €
- 25 years at 1%: € 12,802

On a 25-year loan of € 200,000, a 1% rate difference will result in a variation of approximately € 29,000 on the total cost of your loan.

## Result of the case study

We note here that the longer the loan term, the higher the variation, the greater the difference in the cost of credit.

Thus, a difference of 1% for a loan of € 200,000 over 25 years costs € 29,000 the cost of your home loan, not to mention the impact on the cost of insurance.