FINANCING – MARBELLA – A fixed or variable mortgage?
A fixed or variable mortgage?
advice from a professional real estate agent
The question asked in the headline is one of the most frequently asked questions among buyers. It is not easy to decide between a fixed or variable mortgage, since choosing one or the other is influenced by many factors.
This decision is influenced by factors such as the years of mortgage payment, the repayment capacity, the buyer’s profile and their ability to take risks. But how do we know that it is one of the questions that generates the most doubts? We are going to analyze step by step which mortgage is better.
Euribor
Let’s start by the beginning. To understand how mortgages work, we must first talk about the Euribor.
Mortgages vary according to the Euribor, it is the interest rate applied to operations between banks in Europe, that is, the percentage that a bank pays as a rate when another lends it money.
For this reason, the main difference between hiring a variable or fixed mortgage in 2021 is that in the first case the interest on the loan is adjusted every 6 months depending on the Euribor. However, in fixed mortgages, the level of the Euribor only affects you when contracting the loan. Then its variations will not affect you.
Fixed rate mortgage in 2021
According to the INE National Statistics Institute (INE), fixed-rate mortgages are and will be the most contracted by home buyers. This is due to negative rates from the European Central Bank (ECB), which continue to get cheaper.
Interest rates have a strong tendency to continue falling throughout 2021, so the following months will be fantastic to take out a mortgage loan.
Variable rate mortgage in 2021
The Euribor at historic lows! Variable mortgages can be very attractive, since buyers who take out their variable rate mortgage are and will be paying lower installments.
Now, you will have to live with the uncertainty of not knowing what the evolution of the Euribor will be in the coming years. And, although a change in the trend is not expected in the medium term, the long-term effects of the pandemic are as uncertain as they are unsafe.
Advantages and disadvantages of the fixed rate mortgage
Fixed mortgages do not vary over time, that is, you will always pay the same.
Advantage:
- The fee will always be the same, so you will not have surprises.
- The terms are usually shorter and the installments less prolonged in time.
Disadvantages:
- The fees are higher.
- Sometimes there is a penalty for early repayment.
Advantages and disadvantages of the variable rate mortgage
Variable mortgages are made up of a fixed spread and a variable spread, which is the Euribor, so the installments can vary.
Advantage:
- The fees are lower.
- The cost is less than a fixed mortgage.
- Interest varies according to Euribor.
Disadvantages:
- Although we find it great that the initial cost is lower, a variable mortgage involves taking certain risks.
- Although the costs are lower, the fees are prolonged over time.
The mortgage is a very important decision when buying a home. As experts in the real estate sector and, above all, as buyer agents that we are, our advice is that you always let yourself be advised by professionals who know which mortgage is best for each person.
As a professional real estate agent we will search for you the mortgage that best suits your circumstances and economy.
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