Fixed or variable mortgage? It is the eternal question that many families and individuals pose when seeking financing for a home purchase, and more so now that mortgages have such reduced interests in all its modalities. In this article we will give you the keys to decide which product best suits your needs.
First of all: how do fixed and variable mortgages differ?
The truth is that his name speaks for itself. Variable mortgages have an interest that fluctuates over time, while fixed mortgage charges the same since they are contracted to maturity. However, knowing this is not enough to decide on one or the other in case you need financing for the purchase of the home. There are many other aspects that you should consider to know if it is convenient for you to choose one or the other, for example, what are the expenses of a mortgage.
To help you make an intelligent decision, at Kalisto we have analyzed the advantages and disadvantages of the variable and fixed mortgages in the market, we have inspected its fine print and compiled the aspects that you should always weigh before deciding on one of the two. In any case, if you want to consult on your own all the proposals of the entities, and decide on any of them, remember that you can do it through our fixed mortgage comparator and our variable mortgage comparator.
Advantages of fixed mortgages
Fixed mortgages are designed for people with low risk tolerance, who prefer to pay the same monthly payment, even if it is high. These are its main advantages:
- Stable fees: the monthly accounts are always the same, so there will be no surprises at the end of the month.
- Armored against contingencies: as you agree to pay a fixed amount, your mortgage will not be affected by external factors such as the euribor rises.
- Affordable conditions: today it is possible to find fixed mortgages with very low interest rates depending on the term. The cheapest 10-year mortgages are the 10-year fixed mortgage of BBVA, which has an interest of 1.05%, and the Maricarmen of Abanca mortgage, with 1.45%. If you need a longer term, the cheapest fixed mortgages at 30 years are the fixed smart mortgage of Green Care Bank and the fixed mortgage at 30 years of BBVA. You can check our article on the best fixed mortgages in the market to explore more options.
Disadvantages of fixed mortgages
- Higher interests: contrary to what happens with variable mortgages, for fixed mortgages there are different offers depending on the repayment term. The longer the term, so will the interest.
- Higher opening commission: fixed interest mortgages usually have a higher opening commission than variable mortgages.
Advantages of variable mortgages
Variable mortgages are more volatile than fixed mortgages, but the uncertainty that can be associated is accompanied by several advantages:
- Cheaper in the short term: Currently, it is cheaper to acquire a variable mortgage than a fixed mortgage because the Euribor is negative and many banks offer spreads below 1%. You can check our article on the best variable mortgages in the market for more information.
- Long repayment terms: Although most banks grant 30-year terms for a first home, in the current market it is possible to find variable rate mortgages with terms of up to 40 years.
- Fewer commissions: As a rule, variable mortgages have fewer commissions than fixed mortgages. Some banks offer them completely free of commissions, such as Bankia with its Variable Commission-Free Mortgage.
Disadvantages of variable mortgages
- Unstable installments: being subject to Euribor, variable mortgage installments may vary at each review (every six or 12 months depending on your contract). This can cause your mortgage to become more expensive for reasons beyond your control, such as during periods of crisis.
- Higher monthly payments: variable interest is never applied from day one, all banks charge an initial fixed interest for a certain period of time that can reach 24 months. During that time you will not be able to take advantage of the low Euribor levels.
- They can be more expensive in the long term: as we have already mentioned, as the Euribor laughs, only of the variable mortgage payments, which could significantly increase them in the future.
So which is better, the fixed or variable mortgage?
There is no clear answer: the most suitable financing product for you will depend on your profile and your risk tolerance. We recommend that you take into account your income, the fees that you will have to pay and if you are in a position to assume a possible rise in the Euribor in case you opt for a variable mortgage.