Fixed-rate vs. variable rate mortgages in Spain: the full comparison for non-residents
In the last quarter of 2023, mortgage rates went up, with small tweaks in fixed rates and increases in variable rates as the year ended. Continue reading our comparison of fixed-rate vs. variable rate mortgages in Spain, including their pros, cons, and opportunities compared.
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.
The average interest rate for fixed-rate mortgages in Spain is currently around 3.51%.
Pros and cons of a fixed-rate mortgage in Spain
Pros
- might be 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.
Variable-rate mortgages are currently available with an average starting rate of around 3.02%.
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:
Variable-rate mortgages have been less expensive in terms of initial interest rates, reflecting the higher risk the borrower assumes.
Variable mortgage rates, which are indexed to the EURIBOR, might fall in Q1 in anticipation of the European Central Bank reducing its rates in Q2, offering potential savings on interest for borrowers
Early redemption up to 2%
Depending on the customer profile, there may be a 0-1.5% opening fee.
Additional costs:
- Valuation
- Notary
- Insurance
- Registry verification
Depending on the customer profile, there may be a 0-1.5% opening fee.
Additional costs:
- Valuation
- Notary
- Insurance
- Registry verification
Accessing a mortgage in Spain made easy with Homevest
Homevest simplifies the mortgage process for non-residents seeking financing in Spain. By connecting you with top mortgage brokers, Homevest ensures that your case is presented directly to Spanish banks, making it easier to navigate the mortgage process from abroad.
These connections allow you to compare mortgage offers from leading Spanish banks, with expert guidance to help you understand and select the best option for your needs
If you haven’t found a property yet, Homevest also offers budget estimation services, giving you insight into your buying power and ideal price range.
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 October 2024:
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.
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