It's just a loan

It's just a loan

How hard can it be? You must take out the loan that suits your financial situation. But what is it. In Dreamplan, we sometimes joke that if a shoe store made the same demands on customers as the financial sector does, you as a customer would be greeted with this sentence when you entered the store:

Are you sure you know enough about how our shoes are made to buy a pair?

If not, here you will find our production and material descriptions on 80 pages, then you can come back tomorrow if you still want to buy our shoes.

With this approach, the shoe store would probably quickly go bankrupt. And yes, the financial industry is a little more complex, and it is difficult to find good help in understandable Danish who does not have an interest in selling a certain financial product at the same time. So we thought we'd help out a bit by giving two examples of things that sometimes lead to misunderstandings.

Restructuring of mortgage loans

We can see that stories have started to circulate that those who converted their mortgages to variable interest rates in the spring are now being hit hard. And that is correct to some extent in some cases. If you switched to a variable interest rate to increase the amount of money you have in hand from month to month, you now have the prospect of having less in hand and therefore a more stressed everyday economy.

Unless - you have done it with your eyes open, and made a plan for exactly this together with Dreamplan. This is the case for several of our users who chose to change to a variable interest rate in the spring. They used the extra money in hand to make a bigger savings for e.g. renovations on their house. These days, when the amount they get extra per month dwindles, they simply pay less into this savings. But it has had a solid kick-start, and they are therefore quite a bit closer to their goal of the renovation. At the same time, they are not at all surprised by the scenario, as it was factored into their decision that the situation would very likely remain as it has.

The conversion wave

Another example we see in the conversion wave that is upon us. The greater the distance between your current loan's interest rate and the one you convert to, the more you can cut off the remaining debt. Therefore, a 4% fixed rate mortgage is worse than a 6% fixed rate mortgage, correct? The answer is: far from always. The admission rate matters a lot, especially if you want to have a fixed low benefit in the future. Just look at the table below (calculated 18/10-22), where you would probably get a reduction in residual debt of DKK 362,000 with a 6% loan, but you are also sitting on DKK 1,500 extra per month in net benefits. If you settled for DKK 800 extra in net benefits, you would be able to reduce your remaining debt by DKK 292,000 on a 4% loan. The really interesting thing happens when you look at whether you plan to restructure your loan again in the future. With the 6% loan, you must refinance within 20 years, otherwise you will lose the gain due to the extended term. With the 4% loan, you are guaranteed a profit, even if you forget to reschedule and end up paying it all off (which we would never recommend).