Mortgage loans explained simply: down payment, APR, fixed or variable rate

A mortgage is the biggest financial commitment most people will ever make. A few concepts, once mastered, are worth tens of thousands of euros over its lifetime.

The Down Payment

Usual legal minimum: 15% for a first home financed in Romanian lei (25% for a second home or for loans in foreign currency). In practice: with a 25–30% down payment you get noticeably better interest rates and a more manageable installment. Through government-backed programs like "Noua Casă" (Romania's "New Home" first-time buyer scheme), the down payment can be as low as 5%, but with price caps and other conditions.

APR, Not the Advertised Rate

The APR (Annual Percentage Rate, called DAE in Romania) includes the interest rate + fees + mandatory insurance. Two offers advertising a "5.5% interest rate" can end up with APRs of 5.7% and 6.4%. Compare ONLY the APR, for the same loan amount and term.

Fixed or Variable (IRCC)?

• Fixed rate (usually for 3–10 years, then switching to variable): you pay for predictability. Choose this if a rate increase of 2 percentage points would be hard for you to handle.
• Variable rate (IRCC + margin): IRCC is Romania's official reference index for consumer loans, tied to interbank rates. Historically cheaper over the long run, but it moves with the market. The bank's margin is fixed for the life of the contract — when comparing offers, compare the margins, not the IRCC (which is the same for everyone).

Rule of thumb: simulate your installment at IRCC + 2%. If that number scares you, go with a fixed rate.

Debt-to-Income Ratio

Banks generally accept total monthly payments up to ~40% of net income. Existing installments (car loans, credit cards) reduce your borrowing capacity. An "unused" credit card limit still cuts into your ceiling — close what you don't use before applying.

The Real Monthly Cost

The installment is only part of it. On every listing on 360imobiliar you'll find a real-cost calculator: installment + maintenance fees + property tax + commuting costs. An apartment that's €15,000 cheaper but adds 45 extra minutes of commuting each way can end up costing more over 10 years than a centrally located one.

Refinancing: When It's Worth It

Rule of thumb: if you find an APR at least 0.8–1 percentage point lower than your current one, and you still have more than 5 years left on your loan, ask for offers. Refinancing costs (property appraisal, notary fees, and possibly an early repayment fee — which is 0% on variable-rate loans) are usually recovered within 1–2 years. Banks compete for good customers — use that to your advantage.

Common Mistakes

• Maximum loan approved ≠ maximum you should buy. Leave yourself some breathing room.
• Life insurance bundled with the loan is often accepted by default — compare it against a policy bought separately.
• Choosing a 30-year term "to keep the installment low" without making extra payments. On variable-rate loans, early repayments come with no penalty — use that option.