Fixed-rate vs. variable rate mortgages in Spain: the full comparison for non-residents

If you're currently in the process of securing a Spanish mortgage, you're likely aware that the choice of interest rates for your loan has advantages and disadvantages.

The two most common options in Spain are fixed and variable mortgage rates. But which is the best?

Read on for a helpful comparison of the two, looking at pros, cons, limits, and more. We'll introduce you to a fantastic alternative for requesting and comparing mortgage offers from leading Spanish banks — Homevest, the digital service that simplifies getting a mortgage abroad.

But for now, let's dive right into comparing fixed-rate vs. variable rate mortgages for non-residents.

What is a fixed-rate mortgage?

A fixed-rate mortgage is a loan that maintains a consistent interest rate for the entire duration, ensuring steady, unchanging monthly payments.

Over the past three months, Sabadell had the best-fixed interest rate of all Spanish banks, at 3.97%.

Pros and cons of a fixed-rate mortgage in Spain

Pros

• a cheaper option 
• payment predictability: consistent monthly payments over the loan term
• protection from economic changes
• reduced financial stress thanks to stable payments

Cons

• early redemption fee: banks can charge a redemption fee of up to 2% if you switch from a fixed-rate mortgage in the future
• limited flexibility: not adaptable to market rate reductions
• the duration of the mortgage is typically shorter compared to variable mortgages (20 years vs. 30 years)

What is a variable rate mortgage?

A variable rate mortgage is a loan with an interest rate fluctuating with market conditions over time.

Despite the EURIBOR decreasing, Spanish banks raised their spreads on variable rate mortgages in the past three months. As a result, the best variable rate mortgage currently stands at 5.09%.

Pros and cons of a variable rate mortgage in Spain

Pros

• flexible 20-30 years repayment options
• possible lower payments if rates fall
• lower prepayment penalties compared to fixed-rate mortgages

Cons

• payments may go up if interest rates rise
• uncertainty due to the possibility of monthly payment fluctuations

Fixed-rate vs. variable rate mortgages in Spain

Here’s a quick look at how a fixed-rate and a variable rate mortgage in Spain stack up against each other:

* Homevest evaluated the bank’s offers for its clients, calculating the average effective interest rates over the past three months. 

The effective interest rate approximates the annualized interest rate of a loan offer, considering the loan duration and initial promotional interest rate periods.

In the last three months, mortgage rates fluctuated, with fixed rates slightly decreasing and variable rates initially dropping, then slightly rising towards February.

Homevest makes the banks compete for you

Homevest makes it possible for you to request and compare mortgage offers from the top Spanish banks. By choosing Homevest, you'll benefit from priority services offered by the banks, ensuring that you secure your mortgage in time for the property signing.

Homevest not only makes the banks compete for your case, but can also handle the entire mortgage process for you.

So, which is better, a fixed or variable-rate mortgage?

It all depends on what you're looking for: financial safety and predictability or flexibility and the potential for lower payments. If you're unsure about these options, a mixed mortgage might be the solution, offering the advantages of both fixed and variable rates.

After reading this guide, you should have a better idea of what suits your needs between fixed and variable mortgages, allowing you to choose the best option for your financial situation. Homevest can make the process easy for you, regardless of your choice. 

Sources used and checked in April 2024:

1. Banco de Espana

We recommend obtaining professional or specialist advice before taking or refraining from any action based on the content in this article. The information in this article does not constitute legal, tax, or other professional advice from Homevest Limited. Prior results do not guarantee a similar outcome. We make no representations, warranties, or guarantees, whether express or implied, that the content in this article is accurate, complete, or up to date.