A variable mortgage interest rate means your rate fluctuates over time in response to market conditions. Unlike a fixed-rate mortgage, where your payments remain the same during the fixed interest rate period, a variable rate causes your monthly payments to increase or decrease based on the market interest rate, typically linked to the Euribor — the rate at which European banks lend money to each other.

If the market rate rises, your mortgage interest and monthly payments increase; if it falls, you pay less.

Due to unpredictability and the risk of rising payments, variable rates usually start lower than fixed rates. This type of mortgage can be beneficial when interest rates are low, but it requires you to be prepared for fluctuations in your monthly costs.

Choosing a variable mortgage rate as an expat depends on your financial situation and future plans. Variable rates often start lower than fixed rates, which can save you money if interest rates stay stable or drop.

This can be a good option if you plan to stay in the Netherlands for a shorter period or expect your income to grow.

• Interest rates are low: if interest rates are low, you can enjoy lower starting rates compared to fixed-rate mortgages, saving you money upfront.

• You are comfortable with risk: variable interest rates fluctuate, so you should be prepared for your monthly mortgage payments to increase or decrease.

• You have short-term plans: do you plan to move or refinance within a few years? A variable rate could reduce your costs in the short term.

• You expect market rates to fall: if interest rates are predicted to drop, a variable mortgage can lower your monthly payments.

However, if you prefer predictable monthly payments and want to avoid surprises, a fixed rate might be safer option.

Choosing a variable mortgage interest rate means your payments will vary based on market interest rates. Many factors can cause variable interest rates to fluctuate, such as ECB monetary policies, inflation, competition, and global events.

Pros

• Interest rates: in most cases, variable rates start lower than fixed rates, which means your monthly mortgage payment will be lower.

• Lower monthly payments: if market interest rates decline, your payments can decrease accordingly.

• Flexibility: many lenders give you more room to make extra repayments on your mortgage without penalties.

• Option to fix it later: you can always switch to a fixed rate if market conditions change in your favor.

Cons

• Unpredictable monthly mortgage payments: your payments may rise or fall depending on the market, making budgeting and planning for the future challenging.

• Risk of high payments: if market interest rates increase, so will your payments, potentially leading to higher long-term costs.

• Long-term costs: unlike fixed rates, it’s difficult to predict the total amount of interest you will pay over the life of your loan.

Yes, in the Netherlands, you can switch from a variable interest rate to a fixed interest rate on your mortgage at any time during the loan term, usually without penalties. This switch can often be done directly through your lender’s online portal, or you can contact your mortgage advisor for assistance.

Keep in mind when switching your mortgage interest rate:

• Check your mortgage terms carefully—fixed-rate mortgages may restrict free extra repayments.

• Compare fixed rates from multiple lenders to find the best deal.

• Understand that fixing your rate provides stability but may mean missing out on savings if rates fall.

If you find it hard to decide, you can always contact our mortgage advisor team for assistance.