Are you considering changing from a variable to a fixed mortgage?

Category: Mortgages

The rise in interest rates has made variable rate mortgages more expensive. This is making the option of moving to a fixed mortgage increasingly valued. If this is your case, this post is of interest.

To begin, it must be emphasized that just two weeks ago the Euribor reached its highest levels since January 2009. And that the interest on variable mortgages fluctuates according to the value of this parameter, along with a fixed percentage called differential (this is agreed upon with the bank). If we take as an example a mortgage of €125,000 over 25 years, this increase could mean around €120 more each month. That is, a fairly significant increase.

There are 3 options to consider to make the change from variable to fixed

Novation: this modality consists of modifying the conditions but continuing with the same banking entity. It may refuse to accept said change or include new clauses: other associated products, commissions, etc.

Creditor subrogation: this option means transferring the mortgage to another bank to modify some of its characteristics: interest rate, terms, etc.

Contract a new fixed mortgage and use that amount to amortize the variable loan.  It can be done through the same bank or choose another.

The ideal is that you listen to all the options and allocate the time that this requires, to be able to decide with all the information, since it is a decision that can affect your well-being in the short, medium and long term.

Main advantage and disadvantage

The first and most important positive point is that the quota will become stable. That is, it will no longer become more expensive if the Euribor rises. This translates into greater peace of mind for you.

On the other hand, if this indicator drops in the future, your installments will not become cheaper.

Any other questions, the Home Inmobiliaria team is here to help you.