1.19% – the historically lowest mortgage rate

UniCreditBank (UCB) has a rate of 1.19% with a three-year fixation, which is the lowest on the market. UCB also offers a five-year fixation with a rate of 1.39%. Of course, as it is with the offers from the banks, nothing is completely free. Yes, there is a catch in it! You have to meet certain conditions to get this rate. For the client, when choosing a loan, the most painful and problematic condition is the loan insurance, as most clients are negatively disposed towards insurance. Is a loan with the rate of 1.19% favorable?

In order to find out if such a combination, the UCB offer with their insurance, is really good for the client, we have to submerge into the calculations.

After the calculations, we get the following interesting facts, which I will present to you in three options:

1. If you take a € 100,000 loan for 30 years without loan insurance, you will have a rate of 1.69% with a three-year fixation or a rate of 1.89% with a five-year fixation.

With a 3-year fixation, your monthly instalment will be € 354. In the first 36 months, you will pay the bank a total of € 12,744. From this amount, the interest will be € 4,878, and the rest will be the principal. Your loan balance after three years of repayment will therefore be € 92,134.

With a five-year fixation, your monthly instalment will be € 364 and you will pay the bank a total of € 21,840 in the first 60 months. From this amount, the interest will be € 8,856 and the rest will be the principal. Your loan balance after five years of repayment will be € 87,016.

2. If you take a € 103,000 loan for 30 years with loan insurance, and we include the insurance in the amount of the loan, you will have a rate of 1.19% with a three-year fixationor a rate of 1.39% with a five-year fixation.

With a 3-year fixation, your monthly instalment will be € 340. In the first 36 months, you will pay the bank a total of € 12,240. From this amount, the interest will be € 3,527 and the rest will be the principal. Your loan balance after three years of repayment will therefore be € 94,287.

With a five-year fixation, your monthly instalment will be € 350 and you will pay the bank a total of € 21,000 in the first 60 months. From this amount, the interest will be € 6,675 and the rest will be the principal. Your loan balance after five years of repayment will be € 88,675.

3. If you take a € 100,000 loan for 30 years with loan insurance, and you pay the insurance of € 3,000 from your own resources when signing a loan agreement, you will have a rate of 1.19% with a three-year fixationor a rate of 1.39% with a five-year fixation.

With a three-year fixation, your monthly instalment will be € 330. In the first 36 months, you will pay the bank a total of € 11,880. From this amount, the interest will be € 3,424 and the rest will be the principal. Your loan balance after three years of repayment will therefore be € 91,544.

With a five-year fixation, your monthly instalment will be € 340 and you will pay the bank a total of € 20,400 in the first 60 months. From this amount, the interest will be € 6,480 and the rest will be the principal. Your loan balance after five years of repayment will be € 86,080.

It follows from the above that the most advantageous option for the client is the third option. I would certainly recommend choosing a five-year fixation.

If you decide for the second option, i. e. to include the insurance in the loan amount, you will not have to pay the insurance from your own pocket, but you will spread its repayment over the entire maturity, which will be reflected mainly on the loan balance after five years.

If you choose the second option, rather than the first one, you will save € 522 in total. Although the loan balance will be higher by € 1,659, you will pay € 2,181 less on interest.

If you decide for the third option, i. e. to pay the insurance from your own resources, you will not have to increase the loan, you just need to have your own financial resources for a one-off payment of the insurance.

The insurance price in UCB is comparable to that of other insurance companies.

If you prefer the third option to the first one, you will save € 3,816 in total. Your loan balance will be lower by € 1,440 and you will pay € 2,376 less for interest.

Is a UCB loan with loan insurance favorable?