Interest

The interest rate is stated as a percentage and may be:

  1. fixed, when it is agreed it will remain the same for the duration of the mortgage. Those who choose this option will pay constant instalments which are not subject to change.
  2. variable, when it is determined by reference to changeable indexation parameters which are determined by objective and certain criteria such as the Euribor rate (average price of floating rates determined by objective criteria on the financial markets of the EU) or the ECB rate (set by the European Central Bank). Those who choose this option will be exposed to changes in market interest rates. Whether the choice will be profitable and will result in cost savings can be defined only in retrospect based on actual performance of the indexing parameters.
  3. mixed in which, at the option of the borrower, even several times during the contract, the interest rate may vary from fixed to floating or vice versa. Some types of adjustable-rate home loans provide for a maximum interest ceiling that cannot be exceeded, or a minimum rate below which the applicable interest will never drop. 

Interest on arrears, usually higher than the ordinary rate, is applied in case of non- or late payment of an instalment, for which the debtor may be declared in default and then obliged to pay late payment interest. It is applied to the unpaid instalments, consisting of principal and interest; loan agreements usually explicitly exclude so-called compound interest, i.e. the levying of interest on interest.

By law, the interest rate applied to loan agreements may not exceed percentage limits set by the law, so the borrower has the assurance that the rates charged are not usurious.