Saturday, April 1, 2023, 00:32
Despite the financial storm unleashed after the intervention of Silicon Valley Bank, the Euribor closes March on the rise. If we had to calculate that average today, the closing would be at 3.672%, compared to 3.534% in February and certainly very far from -0.237% a year ago. In other words, someone who has taken out a 30-year variable mortgage for 150,000 euros with a differential of 0.99% plus Euribor, will suffer an increase in their monthly payment of 308.9 euros; that is, it would go from paying 465.63 euros to paying 774.53 from the review, which is equivalent to an increase of 3,706.8 euros per year.
If you want to adjust this calculation to the specific conditions of your loan, you can use the simulator of the Spanish Mortgage Association. If you resort (or others similar) to it, keep in mind that when indicating the interest rate you must add to the value of the Euribor the differential that you have agreed with the bank. Be careful of the value of the Euribor, because it does not have to be that of the month in which it is time to make the termination. It may, for example, that the review of the quota is done in August and that the value that is applied is the average of the Euribor in July or June. In any case, this information must appear specified in the loan deed.
If, once we have verified how much the upward trend of the index is going to hurt us, we want to alleviate this increase as much as possible, we have two options. The first is to repay part of the loan before the increase is applied to us. In fact, fear of the Euribor has doubled amortizations in the Basque Country at the start of the year. It is an option that can compensate us more or less depending on the amount that we can put in (better to shorten the term than to reduce fees), on the tax deductions that we can achieve (if we are not already at the top with the simple payment of the monthly installments ) and the commissions for early repayment that may apply to us (if they are already contemplated in the loan contract).
The second option is to go to the bank to modify the conditions of our mortgage (either to agree on a lower differential or to go from a variable to a fixed rate) or even take the loan to another entity. In the first case, in the case of renegotiation, we would be talking about a novation, and in the second, about a subrogation.
Obviously, we are no longer going to find the fixed mortgages that were offered a year ago on the market, since although the ECB’s monetary policy has a direct impact on variable mortgages, the commercial policies of the banks make the fixed ones more expensive and even make them disappear from their Catalogue. Today, according to the HelpMyCash portal, we can hire them from 3.28% APR. It is well above the 1.5% that we could contract in 2021, but with the change we can gain peace of mind in the face of possible future rate increases.