Is a fixed mortgage or a variable mortgage better?
Keys to choosing between a fixed mortgage and a variable mortgage
There are many doubts and questions that arise for people who are going to get a mortgage for the first time. Before choosing between a fixed mortgage or a variable mortgage, we recommend that you read this.
One of the most repeated is: fixed or variable mortgage?
If you give them a choice, the majority will choose a fixed mortgage, although they do not really know the differences between one mortgage and another. Unfortunately, there is no concrete answer to this question since it will depend on the client's profile.
Differences between Fixed and Variable Mortgage
- A fixed mortgage is usually higher than a variable one, but you will always maintain the same installment
- The variable mortgage is lower, although if the Euribor goes up, your mortgage will also go up
The most important thing when taking out a mortgage is not whether it is a fixed rate or a variable rate.
Factors to take into account before deciding between fixed or variable
- The deadline: Some banks put greater time limitations on fixed-rate mortgages, so if you want to take out a 40-year mortgage but the bank only gives you a 25-year mortgage if it is at a fixed rate, you will have to decide what is best for you.
- Type of interest: There are banks that have a fixed rate mortgage with a very high interest rate, making the mortgage very unattractive for the client.
- Links: Links are those parallel products that the bank makes you contract to lower your mortgage. Domiciliate payroll, contract life and home insurance, credit and debit cards, pension plans, etc. If to have a good mortgage you have to have contracted many products of this type, you have to assess to what extent it suits you.
- Mortgage expenses: With the new mortgage law, banks bear the majority of mortgage costs. Although there are real differences when it comes to taking out a mortgage with one bank or another. Some charge an opening fee and others do not, some banks bear the costs of the appraisal and others charge them to the client, and some entities force you to pay several years in advance for life and home insurance, making the operation substantially more expensive.
- Purchase percentage: If you need more than 80% financing but your bank gives you a fixed-rate mortgage as long as the mortgage does not exceed 80% of the purchase, you have to choose whether it is better for you to contribute more capital or stay with a variable mortgage.
The mixed mortgage against the fixed and the variable
In recent years, some entities have incorporated the mixed mortgage into their offer.
The mixed mortgage is a mortgage in which one part is at a fixed rate and another part is at a variable rate. ING has a mixed mortgage with a maximum of 40 years where the first 10 years are at a fixed rate.
One of the benefits of the mixed mortgage is that it gives you peace of mind from the fixed mortgage in the first years.
During those years you will have the same fee and you will be able to save to pay off the mortgage and thus lower the debt for when it becomes variable.
If you have taken a mortgage to buy a home to invest, the mixed mortgage may interest you to have greater security.
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Conclusions
The best way to decide if a fixed mortgage or a variable mortgage is better for you is to study and compare the different options you have according to your profile. Get an offer from different banking entities and personally negotiate the conditions with all of them to get the best conditions.
Once you have all the real possibilities to study them, exhaustively compare the particular conditions of all of them to find the mortgage that best suits you. And one thing is certain: a fixed mortgage provides much more peace of mind than a variable mortgage.
Knowing in advance what you are going to pay throughout the life of the mortgage allows you to plan your economy in advance and avoid surprises.
In addition, a fixed-rate mortgage allows you to increase your savings capacity and pay off your mortgage early.
Most banks no longer charge partial or total early cancellation interest, encouraging customers to pay mortgages in advance.
If you want our adviser to inform you about whether a fixed mortgage or a variable mortgage is more convenient for you, all you have to do is request your free financial advice
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