Variable Mortgage with CAP: Security Has a Price (Convenient?)

Choosing between Fixed and Variable Rate is the eternal dilemma. Fixed makes you sleep soundly, but often costs more. Variable is cheaper at first, but if Euribor goes crazy (like in 2023), your family budget explodes.

There is a third way: the Variable Mortgage with CAP (Maximum Ceiling).

The Problem: Unlimited Uncertainty

With a pure variable, your rate is: Euribor + Spread.

If Euribor goes to 5%, 8% or 10%, your installment rises without limits. There is no ceiling. This uncertainty is toxic for long-term financial planning.

The Agitation: The Cost of Protection

The mortgage with CAP places a contractual limit. Example: "The rate can never exceed 4.5%".

However, banks give nothing away. Often the "Spread" of a mortgage with CAP is slightly higher than a pure variable (e.g., 1.5% instead of 1.0%).

The question is: Is it worth paying this "insurance premium"?

The Solution: Worst Case Scenario Analysis

You have to think like a risk analyst.

1. Compare the current Fixed Rate with the level of the CAP.
2. If the CAP is equal to or lower than the current Fixed Rate, the mortgage with CAP is mathematically superior.
   • Best Scenario: Rates go down, and you pay less than Fixed.
   • Worst Scenario: Rates go up, and you pay at most what you would have paid with Fixed (or slightly more).

You only have "Upside" (potential gain) and a limited "Downside" (risk).

📱 The Simulation on Amorti

Simulate the stress test.

1. Use AmortiApp to create a mortgage.
2. Set the rate to the CAP level (e.g., 4.5%).
3. Look at the resulting monthly installment.
4. Ask yourself: "Can I afford this installment for 5 years in a row?"

If the answer is yes, the mortgage with CAP is a smart choice. If the answer is no, you need to look towards a lower Fixed or reduce the loan amount.

Protect yourself without giving up flexibility. Do the math.

Simulate Maximum Installment