In addition to the challenge of adapting their budgets to the notable increase in the cost of living, households with mortgages referenced to the Euribor will have to face this year the rise in the installment of this loan. For the first time in six years, the indicator that is most used in Spain to calculate mortgages closed in April at a positive rate (0.013%), a trend that analysts predict will continue to rise. To avoid having to tighten their belts more, many families are beginning to consider changing the interest rate on their mortgages, from variable to fixed.
But, how much does the change cost? Will it pay off? Ask those interested who come to bank offices these days to find out about this possibility. According to the Association of Financial Users (Asufin), the answer will depend on the conditions offered by your entity, if there are better offers on the market and the expenses that the operation may entail.
The recommendation to switch to a fixed-rate mortgage “is very relative, given that the personal conditions of each borrower have to be taken into account,” says the president of Asufin, Patricia Suárez. “It is not the same to get a mortgage to acquire your main home, with the idea of paying off that loan over a long period of time -20 or 30 years-, than to get a mortgage with the idea of amortizing the purchase in a short space of time,” he adds. she.
When the Euribor was negative, variable-rate mortgages with a low spread were cheaper than fixed-rate ones. But this last type offers greater stability than the variable rate, since the same interest is applied throughout the repayment period of the loan. While when the interest rate is variable, the installment rises or falls depending on the fluctuations of the reference index. For example, in the case of a mortgage of 150,000 euros to be repaid over a period of 30 years and with a differential of 1% plus Euribor, it will become more expensive 402 euros per year if the review is made by applying the data of the indicator of the month of April, since the Euribor has risen almost half a point in the last 12 months.
In recent years, banks have lowered the price of fixed-rate mortgages
Although historically most of the mortgages that were signed in Spain were at a variable interest rate, the mortgage war waged by the bank since its profit margin began to fall due to the negative price of the Euribor was tilting the balance towards the type fixed, when the offers become cheaper. Thus, if in 2015 only 8.6% of the mortgages that were constituted were at a fixed rate, today the percentage exceeds 60%.
Since 2019
A legislative change has reduced the cost of changing mortgages
Before the forecasts of increase of the Euribor, many consumers begin to make a move. As confirmed by Asufin and the General Council of Notaries, there is growing interest in changing the interest rate on mortgages. A trend sponsored by the latest legislative changes that significantly reduces the cost that this type of operation entails for borrowers.
Since the entry into force of Law 5/2019 regulating real estate credit contracts, the costs associated with the formalization of the constitution of the loan, as well as the extension, novation or subrogation of the same, are assumed by the financial institution. This includes notarial and registry fees, tariffs, management and the Tax on Documented Legal Acts (AJD). Therefore, the consumer must only pay the appraisal of the property, if necessary for the type of operation, and the bank commission -if any-.
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expenses, procedures
How to change the interest rate on a mortgage
The spokeswoman for the General Council of Notaries, María Teresa Barea, details that in mortgage novation -when the conditions of the mortgage are changed, for example the interest rate-, there may be bank commissions, although with a legal limit of 0.10 % when only the term of the loan is modified. In the case of a change in the interest rate, the commission will depend on what was agreed in the deed, as also occurs with creditor subrogations -when the mortgage changes banks-, a case in which sometimes the client You must pay a commission for total early repayment subrogation.
Barea defends that the new rule has been “crucial” in the mortgage market. “We notaries value it very positively,” she adds. The main reason is that, prior to signing the mortgage, the bank user must attend an interview with the notary public without representation from the financial institution -called a transparency act-, who will inform them of the procedures that will be carried out. on the day of the deed, at the same time that the client will be able to express their doubts and concerns and record possible errors in the documentation so that they can be corrected before signing. The act of transparency is carried out both in the constitution of new mortgages and in novations, subrogations and mortgage extensions.
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One of the concerns of borrowers considering changing their type of mortgage is what difficulties may arise during this type of operation. “That the client has to assume the expenses of the change and, therefore, it is not on account”, they explain from Asufin. For this reason, the most beneficial thing for the banking user is that the entity assumes the cost of the commission that may entail the modification of the mortgage interest rate.
Another option offered by some entities is to cancel the mortgage and sign a new one. In this case, the client must pay the cancellation and opening commissions -if any-, the appraisal of the property, as well as the cost of the registration cancellation of the first mortgage, “although if the entity finds it worthwhile to stay with the client, he usually takes care of all the expenses”, they assure from the association.
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