As with most other countries, Spanish banks offer an array of different types of mortgages that can often be somewhat confusing to the outsider. And as a mortgage is a loan that you could be paying back for up to 30 years, choosing the right one to suit your circumstances is of the utmost importance.
A mortgage where everything is under control and there are no unexpected or hidden surprises. A fixed mortgage is one in which the amount of the repayments remain unchanged for the entire term of the loan. The borrower agrees to a 'fixed' amount of money to be paid back each month, allowing him to budget and plan his finances accordingly.
You know exactly how much you need to pay each month
Regardless of fluctuating interest rates, your mortgage repayments will never change
You enjoy peace of mind and a relatively stress-free mortgage
Falling interest rates may result in buyers' remorse
There may be restrictions or penalties if you want to pay off some of the loan early
Fixed mortgages tend to have a higher rate of interest
Governed by fluctuating base rates, a variable mortgage is fixed for the first year but from then on in the rate of interest is subject to change. When such a change does occur, the monthly payment is adjusted to reflect the new rate of interest. This could be higher or lower, depending on the economy.
You could end up saving money should interest rates drop
Paying less with lower interest rates means you could use the spare money to pay off lump sums of the loan
The initial rate tends to be quite low, making those first few years easier to manage
You may end up paying more if interest rates rise
Historically, variable rates have been higher than fixed mortgages
As the name suggests, this is a combination of fixed and variable mortgages. The first few years of the repayments (up to 15 years with a minimum of three with UCI) are fixed and under control, before changing to a variable mortgage where interest rates can vary, thus affecting the monthly repayment amount.
You get the best of both worlds, combining the security of the fixed mortgage with the flexibility of the variable
Ideal for the buyer who knows little about the market but wants the advantages of both types of mortgages
Like the variable rate, rising interest rates could result in increased payments
Budget adjustments are necessary during the term of the loan