The new landscape of the real estate market has caused, in turn, a fairly profound change in the market for mortgage loans. A traditional variable rate mortgages indexed to Euribor , an index that became the best known financial indicator and followed by the Spanish families have joined the fixed – rate mortgages with a fixed rate throughout the period amortization, and mortgages mixed type , which combine features of both.
House keys Customers will no longer have to choose between a fixed rate mortgage and variable rate mortgage. Both have significant advantages, but also very difficult to save drawbacks. The first, because right now are more expensive than variable rate mortgages, and this means that while rates remain low (and may well continue for quite some time), we will be missing a good opportunity to save. However, if rates rise and therefore so does the Euribor, mortgages end up being more expensive, something that may end up being too expensive for our battered family finances.
No one can predict, even with vague accuracy, what will the interest rates throughout the period of repayment of a mortgage loan can be up to 40 years, but what is certain is that, sooner or earlier, the rates will eventually rise , especially if we consider that have never before been so low. This uncertainty makes, we choose what we choose, and it is more likely that we have not 100% successful.
Given this scenario and aware of the doubts of customers, financial institutions have begun to market mortgages mixed type , combining the best (but also the worst) of both alternatives. Loans are treated consisting of the payment of a fixed amount early amortization of the mortgage, which can last up to 20 years, then go to repay the loan at a variable rate, with the Euribor Oscillation.
They are therefore loans at two speeds, where we forget the early years of the evolution of the Euribor, with predictability and tranquility that this provides us, while during the rest and we will have to worry about these oscillations.
Are interesting mixed rate mortgages?
The big question of this type of mortgage is to what extent is attractive benefit from a fixed rate now, with a Euribor at historic lows (around 0.139% in October 2015). The answer depends on the offers made by financial institutions. The oldest market, with deals around 5.50%, evidently were not competitive, but the increasing competition, even offers below 2%, are making this type of financing alternatives are acquiring a role each increasing.
In any case, we must take into account the change that occurs when the fixed interest switches to variable, which can be a very important cost overrun in the monthly installment to pay. For example, for a mortgage of 150,000 euros to 30 years you pay a fixed interest rate of 2% and whose monthly fee is therefore 550 euros, the monthly cost which would have to assume if the Euribor has risen to the 4%, with a spread of 1.5%, will be 200 euros, with a monthly fee of around 750 euros.
So I compensated a mortgage to mixed type?
Question Mixed rate mortgages represent a very interesting alternative both variable rate mortgages as fixed rate mortgages, combining the advantages of both. In any case, keep in mind that the objective of financial institutions is to earn the most money possible with the products sold in the market, and mixed rate mortgages were not going to be an exception.
And, although no analyst has the crystal ball on the future development of markets and interest rates, most agree that Europe will suffer a period of slow growth and limited in the medium and long term, one scenario for interest rates to continue low for at least the next ten years. If we take certain these assumptions, the interest rate we will have to take will be higher than a variable rate mortgage during the first years of the loan. In this sense, the interesting thing would be to hire a reverse mortgage mixed, paying a variable interest the first year and the last fixed rate.
For this reason, it is important to know what other loan terms as regards fees and insurance linked and, in any case, request expert advice to not bring surprises with future monthly payments are.