Should a mortgage with fixed or variable interest suit me?
When a mortgage is granted, you are committing to repay in several years the money that the bank has lent you to buy your house along with interest . These interests that you are going to pay within the monthly installment can be fixed, that is, you will always pay the same percentage of the purchase price of the home, or variable and that change from time to time depending on the Euribor normally. Depending on your circumstances and the risk you want to assume , you should choose one type of mortgage or another.
What is a fixed interest mortgage and how does it work?
In a fixed rate mortgage you will always pay the same monthly payment , it will not depend on fluctuations in the financial market. If the interest rate that the bank decides to apply to you is, for example, 1.5%, this will remain that way until you finish paying the mortgage.
It is usually the option chosen by those people who want the peace of mind of knowing that they will always pay the same , although it may be cheaper in the variable, they do not have that guarantee. If you know that you can pay that amount every month for your work, it is the one that will give you the least complications.
What is a variable interest mortgage and how does it work?
You can also choose a variable rate mortgage. This means that the interest you pay on the price of the home will change based on a reference that is normally the Euribor .
The most common thing is that the bank updates the interest rate every six months with the latest value of the Euribor, which means that you will pay the same for six months and then the interest will be recalculated. It may go up or it may go down .
When to choose a fixed or variable interest mortgage
Choosing one or the other option will depend on whether you want to take the risk of not knowing the long-term interest rate or not.
There is a third formula, which is the mixed formula , in which banks offer you a fixed interest rate in the first years , when the mortgage payment is higher and it may be riskier to assume a changing rate, and in the following years. have a variable type . This can be a very good option for those who are not sure if one or the other is right for them.