In these times, anyone who acquires a home will contract a mortgage loan at their bank. Otherwise, very few would be people who could buy a house in cash. If this is your case, and you are going to buy a property, you will be thinking about what type of loan suits you best. There are several kinds; But in this article we explain what a fixed-rate mortgage is, how it works , what its advantages and disadvantages are and why it is a trend .
What is a fixed-rate mortgage
A fixed mortgage is a mortgage loan that has a fixed interest ; that is, the fee will always be the same for all the years it takes to repay the loan. Once you contract the fixed-rate mortgage you will know what the monthly payment is and the total cost of the mortgage. Both data will not vary for any reason ; even if the markets go up or down.
These types of mortgages do not depend on the Euribor , the fee will be the same month to month. The mortgages that do depend on this index – European type of interbank offer, or what is the same, the interest rate at which European banks lend themselves – are those of a variable rate.
Characteristics of fixed mortgages
As we have already pointed out, the main characteristic of a fixed-rate mortgage is that the interest does not change; It will remain unchanged throughout the life of the loan. This, without a doubt, generates tranquility and security in the client.
In addition, the repayment term of these mortgage loans does not exceed 30 years – the variables can reach 40. The variable rate mortgage will have different characteristics depending on whether the home is first or second residence. These characteristics may also vary depending on the bank.
- Fixed-rate mortgage for first residence: The financing will comprise between 70 and 80% of the value of the property, and the maximum repayment term will not exceed 30 years (or 75 years of the applicant).
- Fixed-rate mortgage for second residence: The financing will only reach 60% of the value of the home and the maximum term of financing will not exceed 25 (nor 75 years of the applicant).
Advantages of fixed mortgages
- The fee you will pay will always be the same, regardless of the Euribor .
- This variable monthly payment makes it a stable product that allows you to better plan your economy.
- Ground clauses and fixed mortgages do not go hand in hand; So you avoid them.
Disadvantages of the fixed-rate mortgage
- The maximum return period is 30 years , not one more. Maybe it’s a short time for some economies.
- If you anticipate that you can repay the loan in the short term, it does not suit you, because even today variable rate mortgages offer a lower interest .
How to hire a fixed-rate mortgage
After seeing all possible options, compare between banks and do your calculations, if you opt for a fixed-rate mortgage, the next thing will be to collect the documents that the bank will request and complete the contract.
- The DNI.
- The income tax return for the last year.
- Updated work life.
- Latest bank statements.
- Deeds of each of the other properties you own
- If you live for rent, lease and last receipts.
It is recommended that you ask your bank for a copy of the contract so you can read it carefully and answer any questions. The bank has a duty to complete this step, but it is worth watching.
The contract will be signed before a notary ; Under the new mortgage law, you have the right to consult with the notary without incurring an additional expense. Better have no doubt before signing . Review all the clauses and do not skimp on questions, the bank agent must solve them all, that’s what it is for!
If you want to hire a fixed-rate mortgage and have doubts, go to your financial advisor. Before making any decision about your economy, it is essential to have very clear ideas. Knowledge is everything!