I'm trying to understand the difference well because I'm considering which one to choose for buying my first apartment. Can someone explain the pros and cons of both? I'm especially interested in knowing what risks I run with the variable rate if interest rates go up.
With a fixed rate, you pay the same installment for the entire mortgage, with a variable rate the installment changes every time the reference index (like Euribor) moves, so if rates go up your installment goes up and could increase quite a bit if things get worse.
Fixed gives you peace of mind but usually starts at a slightly higher rate, variable starts lower but the risk is all on you if the market goes bad - and yeah, you could end up with payments you can't afford if you get unlucky with timing. Before you decide, check the bank margins carefully and figure out how much you could actually afford to pay if rates hit 5-6%, not just what the payment is today.
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