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Types of mortgages

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.

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Fixed Mortgage

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.

Pros
  • 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

Cons
  • 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


Variable Mortgage

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.

Pros
  • 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

Cons
  • You may end up paying more if interest rates rise
  • Historically, variable rates have been higher than fixed mortgages


Mixed Mortgage

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.

Pros
  • 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

Cons
  • Like the variable rate, rising interest rates could result in increased payments
  • Budget adjustments are necessary during the term of the loan

Find out more about mortgages in Spain...





Need a quote? Have a question? Get in touch with UCI:

By clicking "Submit" you confirm you agree to our website terms of use and our privacy policy.