Forums » Discussions » When is a variable mortgage better than a fixed one
When you find your ideal apartment, you don't want to miss it. It is then when financing becomes something of vital importance. Not only because without it you can be left without a flat, but because depending on the type of mortgage you choose, you can end up paying a lot of extra interest. Therefore, before hiring a mortgage, it is normal to ask yourself: Is a variable or fixed mortgage better? What does it depend on? Today we will answer these and other questions.
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Is a variable or fixed mortgage better?
If you were to ask us which of the two mortgages is cheaper today, the answer is simple: the variable interest rate mortgage . Currently the Euribor is negative and that affects the monthly fee. Compared to a fixed rate mortgage, the fee is much lower .
However, a mortgage is not just any loan. It is a loan with a duration that can be extended to 40 years and that on average exceeds 20 years. If we add the loan duration factor to the equation, then the answer is not so obvious anymore. We know how the Euribor is right now, and we intuit how it will behave in the short term. But who knows what will happen 20 or 30 years from now?
Short term
In recent years the Euribor has followed a downward trend and has been placed in negative values. In fact, this August 2020 has reached another all-time low . Experts argue that in the coming years the Euribor forecast is to keep these values below zero. And why are we telling you all this? Easy. If your idea is to pay off the mortgage in about 5 or 10 years , then there is no doubt that a variable mortgage is better than a fixed one . As much as the Euribor can rise a little and stabilize around 0% in a few years, it is difficult for the installments to exceed the amount of current fixed-rate mortgages. If this is your case, the decision should be easy.
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Long-term
In the long term, the evolution of the Euribor is an uncertainty. It may remain at those minimum values as in recent years, why not. But it may also grow to values of 1%, 2% or 3%. If this increase occurs, the monthly installments of a fixed rate mortgage would be cheaper than the variable rate.
If your idea is to close a 30-year mortgage, the decision between variable or fixed rate will depend on your aversion to risk. Those who believe that the Euribor is going to stay stagnant will opt for a variable rate mortgage. On the contrary, those who believe that the Euribor will eventually rise sooner rather than later will prefer to play it safe and take out a fixed-rate mortgage.
What is the best variable mortgage?
Today all financial institutions claim to have the best variable mortgage. However, on paper, the title of the best could only belong to one. If we look only at the interest rate, the best variable mortgage will be the one that offers the lowest spread . Or what is the same, the one that adds a lower interest rate than the Euribor. If the differential is around 1% we will be talking about a very good variable rate mortgage.
But not all that glitters is gold. In many cases, the best offers usually come with the obligation to contract linked products such as life insurance or a pension plan. This may not matter to you as long as you lower the price of your mortgage, but what if it doesn't? For those who want to avoid being linked a lot with an entity, the best mortgage will be the one that offers the lowest interest rate without taking into account connections and avoiding paying the opening or cancellation commission.
How to get the best variable mortgage?
As you can see, each loan is different, and each person has their preferences and needs. Therefore, the perfect mortgage will be the one that best suits those preferences and needs of each client. And how is it achieved? With the best team of advisers behind. A team that is interested in your case, that knows the financial sector like no one else and that knows how to find what you need at all times. A team like Housfy's .
Resources
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