Mixed mortgages: advantages and disadvantages

When the need arises to apply for a real estate loan, the first thing that is thought of is the interest rate that will benefit us the most: fixed or variable. But what about mixed mortgages? It is a modality in which the two previous types are combined and, according to financial experts, are more advisable for customers with the ability to make an early amortization.
In this article we tell you what this type of mortgage consists of, as well as some of its advantages and disadvantages.

What is a mixed mortgage?

It is a mortgage loan that combines the two interest rates. During the first years the client pays a fixed fee and then goes on to pay the bank a variable monthly amount (which will depend on the value of the Euribor).

Mixed mortgages are a little-known product and there are hardly any consumers who apply for them. According to the latest data published by the INE, in March more than half of the mortgages that were granted were fixed rate and the rest, variable.
The reasons can be several: they are products little advertised by banks, the offer is scarce and the commissions for early repayments during the fixed interest period are usually higher. In the study Youth and housing 2020, carried out by AEDAS Homes, they point out another reason: 2 out of 10 people interested in acquiring a home do not know what a mixed mortgage is.

Advantages and disadvantages of mixed mortgagess

Getting the perfect mortgage depends on many circumstances, both personal and economic. According to experts, loans that combine the two interest rates are perfect for customers who intend to repay the credit early, that is, they can make an early repayment.

Or also for people with the intention of selling the house shortly after buying it. In both cases, customers ensure some financial stability during the period when the interest they pay is fixed. It is usual that during this section, the interest is lower than in the case of a conventional fixed-rate mortgage.

For the president of the Spanish Mortgage Association (AHE), Mr. Santos González, “with the market so divided between fixed and variable rates, a mixed offer is a very reasonable conjunction between both options.”

The disadvantages of mixed mortgages are associated with the uncertainty that always surrounds the variable rate. It is important to remember that the amount of the monthly installments of these loans varies according to the Euribor. At present this remains in negative values and it is most likely to remain so for a few more years, but how many? Is it possible to guarantee that in 20 or 25 years it will still be this low?

As for the conditions associated with them, they are not usually very different from the rest of the mortgages. Only the commission for early repayment, during the fixed interest period, is usually higher than in the case of the most common loans.

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By Catharine Bwana