Fixed or Floating Rate: Risks and Scenarios for Borrowers

Fixed vs Floating Rate: key points for borrowers 📌

Choosing between a fixed and a floating interest rate affects your monthly budget, long‑term costs and peace of mind. The right choice depends on your income stability, how long you plan to keep the property, and your tolerance for change.

Quick comparison ✅

• Fixed rate: predictable payments for a set period, good for budgeting and risk-averse borrowers.
• Floating (variable) rate: tied to market indices and can change, offering potential savings but also higher future payments.

Typical borrower scenarios and what fits best 🧭

1. Steady income and long ownership plan

• Fixed rate is often preferable — it provides certainty and easier long-term planning.

2. Income likely to rise in a few years or short ownership horizon

• Floating rate may be attractive, especially if you expect to refinance or sell before rates may rise.

3. Expectation of market rate increases

• Fixed protects you from rising costs, especially for long-term loans.

4. Short-term loan or plan to refinance soon

• Floating can be more cost-effective if the market stays favorable.

Practical assessment: are you prepared for rate changes? 🧾

• Check your income stability: high, medium, low.
• Identify loan horizon: short, medium, long.
• Do you have an emergency fund covering several months?

If your preparedness is low, the safer option is usually a fixed rate.

Contract details to verify before signing 🔎

• Is there a cap on how much the floating rate can increase?
• Are there penalties for early repayment or conversion of rate type?
• How often is the rate adjusted and what index is used?

Step-by-step actions before you commit 🛠️

1. Model two scenarios: optimistic and stress tests showing how payments change.
2. Ensure you have a financial buffer if payments rise.
3. Ask the lender about conversion options and any fees for switching or prepaying.
4. Compare offers from multiple lenders beyond headline rates — include fees and flexibility.

Questions to ask the bank 🗣️

• Show illustrative payment schedules under different market scenarios.
• Explain the exact mechanism and timing of rate adjustments.
• Clarify available support or restructuring options for temporary repayment difficulties.

Simple decision checklist ✔️

• Long-term owner and prefer certainty — lean fixed.
• Short-term hold or likely refinance — floating could work.
• No emergency fund — prefer fixed.
• Comfortable with risk and rising income prospects — floating with protective clauses may be an option.

Empathetic advice from experts 🤝

Choosing a mortgage strategy is stressful. Start with honest scenario planning and ask for clear examples from lenders. A small upfront effort in modelling outcomes reduces financial stress later.

Where to start

• Search current property options to understand market context: https://buyhome.ge/en/search
• Browse apartments if you are looking for a home: https://buyhome.ge/en/apartments

If you want, BuyHome can help calculate scenarios and find properties that match your financing needs. Contact us for tailored support when choosing a loan and property.