2023-11-01 09:00:07
11/01/2023 – 07:57h Updated 11/01/2023 – 08:06h
Choosing between a fixed, variable or mixed rate mortgage is one of the biggest headaches for future mortgage holders. A decision that has become especially complex given the current context, in which the rise in interest rates and inflation is increasing the share of variable mortgages.
The first thing to be clear about is that there is no type of mortgage that is better than another.. On the contrary, each one has its characteristics and particularities and, depending on the personal and financial situation of the applicant, as well as the economic context of the country, the choice of mortgage will vary.
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How to choose the best mortgage according to personal circumstances
It is one of the big questions to take into account before signing a mortgage. Mixed, fixed or variable? Below you can consult the characteristics of each of these mortgages, as well as the advantages, disadvantages and the profile for which they are recommended. So you can get an idea of which could be better in each case.
When is it advisable to take out a variable mortgage
In variable mortgages the fee to pay is linked to the Euribor. A reference index that, until this last year, was characterized by being quite low and even negative, but which in recent months has increased to around 4%. In general, when taking out a variable mortgage, The applicant signs to pay a fee whose interest results from the application of the Euribor plus a differential.
When this index is low, the payment is reduced and paying the mortgage is not a major problem. But when it rises, like now, it causes big problems for mortgage holders, such as the inability to make the payment. In euros, in the largest increases in the Euribor, There are mortgages that have gone from paying an average of between 500 and 600 to reaching 1,000 euros per month.
In practice, variable mortgages are financial products that can greatly benefit those mortgaged at certain times of the loan, but can also cause a sharp increase in the amount that must be paid in installments. A double-edged sword for which you must be preparedbecause it is very difficult to know what the future will hold and how this index will behave.
Therefore, variable mortgages today are specifically designed for those clients who are willing to risk the evolution of this indicator, both up and down. A profile that must have enough money saved to face the times of greatest rise in the Euribor. Although the good news is that, in those cases where it is not possible, mortgage holders can start the process to change the variable mortgage to a fixed one.
Regarding the choice, The ideal is to value the one that offers a lower differential added to other advantageous conditions. And to choose the best, there is nothing like consulting the catalog of the best variable mortgages.
In which cases is a fixed mortgage recommended
Fixed mortgages are synonymous with peace of mind. It is signed from the beginning with conditions that do not vary throughout the loanso they are ideal for those who do not want to risk unforeseen futures or trend changes in economic indicators.
The disadvantage of this type of loan is that they usually have a higher interest rate than variable loans from the first moment. And that, additionally, Compared to users who have a variable mortgage, when the Euribor is low, they will pay significantly more in installments each month.
At the other extreme, these mortgages are not scary and, in the face of inflationary contexts like the current one, they remain intact, which offers a reassuring security for mortgagees throughout the life of the loan. For all these reasons, this is a type of mortgage that is primarily suited to a financially prudent mortgage applicant. Look for continuity and peace of mind in payments without surprises.
When choosing it, some of the basic recommendations include comparing the best 2023 fixed mortgages on the market to choose the one that offers the lowest interest. Added to other conditions and aspects, such as not having much connection associated.
In which cases is a mixed mortgage better
Finally, a mixed mortgage is a hybrid between the previous two. In general, it offers the client a fixed mortgage type during the first years and then, after a specific period, a variable type mortgage with a specific differential.
The time offered in a fixed type is usually between 5 and 15 years, depending on the entity where it is contracted and usually has a somewhat lower interest than in the case of fixed loans. It can become a good alternative for people who seek stability in their mortgage payment in the current economic context, but who trust or prefer a variable for a few years from now, with the expectation that the Euribor will drop.
After contracting it, if the time of the fixed modality passes and the turn of the variable mortgage arrives, but the economic context does not improve and you think that you cannot avoid the increase in the variable mortgage payment, the best thing would be to negotiate with the bank to assess possibilities, such as changing the loan to avoid paying more.
If you want to read more news like Variable, fixed or mixed mortgage? Which one to choose according to my situationwe recommend that you enter the category of Mortgages.
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