Should I get a Fixed or Variable Rate mortgage?

When it comes to getting a mortgage in Spain, this is the most common question!

Why? Well, choosing the right mortgage rate can save you thousands of Euros, so it’s a decision that shouldn’t be taken lightly. A fixed rate mortgage offers certainty; however, a variable rate mortgage can seem appealing as there is always the chance of paying less interest over your mortgage’s lifetime.

Below we sum up the pros and cons for both so you make the right decision. 

Should I get a Fixed or Variable Rate mortgage?

Fixed or Variable - what's the difference?

The difference between the two rates are that while fixed rate mortgage payments stay the same, variable rate mortgage payments are subject to change.

There is a variety of different mortgages available on the Spanish market, choosing a fixed or variable rate is the first decision you need to make.

So, which should I get?

When you are deciding what mortgage to choose, you may be confused as to whether a variable or fixed rate mortgage is the right option for you. This is an important decision for mortgage buyers to make, the impact of the wrong decision will last the entirety of the mortgage’s life. Let’s take a simple look at the pros and cons of each.

What are the benefits of a Variable Rate Mortgage?

Pros

  • Variable interest rates are typically lower than those of fixed rate mortgages.
  • To protect mortgage clients, variable rates in Spain are normally fixed over a 12-month period and reviewed every year. This can help mortgage buyers with budgeting for the year.
  • The interest rates can increase or decrease subject to the base rate applied or by the Euribor rate. This can make a variable mortgage the more attractive option.

Cons

  • Lower rates are offered because you are taking on the risk of the rate increasing in the future. 
  • Mortgage applicants may be able to pay the interest rate at the time of taking out a variable mortgage. However, there is no certainty that they will be able to pay their mortgage if the variable rate increases.
  • The increase or decrease of rates subject to the Euribor rate is also what makes a variable rate interest mortgage a riskier option for clients.

What are the benefits of a Fixed Rate Mortgage?

Pros

  • With a fixed rate mortgage, you will benefit by being able to budget accordingly as payment amounts do not change, either for a fixed term or for the entirety of the mortgages lifetime.
  • As a variable mortgage can increase subject to the rates of the European Central bank, a fixed rate can work out as the cheaper option in the long run.
  • A lot of people prefer to know exactly what they will be paying for a fixed amount of time or for the entirety of their mortgages life. A fixed rate can offer security and is the safer option.

Cons

  • The fixed rate mortgage payments are usually slightly higher compared to the variable option.
  • If the Euribor rate for variable mortgages doesn´t increase, you may end up paying more for your fixed rate mortgage

Over to you...

So, now we’ve taken a closer look at the types of mortgages available in in Spain, you should have a better idea of the pros and cons of each. Ultimately it’s up to you to choose which mortgage best suits your personal situation.

For more information see – Non-Resident Spanish Mortgages and Resident Spanish Mortgages for Mortgage Calculators and Frequently Asked Questions. 

Apply for a Mortgage with HomeFinance Spain

Our team of mortgage brokers are ready to help and answer any questions that you might have. HomeFinance Spain can explain the mortgage process and will ensure you get the best mortgage that suits your circumstances. Get in touch today by calling (0034) 96 682 11 72 or by filling in the contact form provided.

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  • Non Resident Mortgages
  • Resident Mortgages

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