How to change a variable mortgage to a fixed mortgage

We'll tell you about the options for changing from a variable-rate mortgage to a fixed-rate

When deciding whether to change a variable-rate mortgage to a fixed-rate mortgage, there are a series of aspects worth considering:

Mortgage loans classified by interest type:

- Variable-rate loans: with a variable-rate mortgage loan, the interest rate is a combination of a reference rate (the most common is the Euribor) plus a pre-established fixed margin. The installments to be paid will vary after each revision, based upon changes to the Euribor.

- Fixed-rate loans: with a fixed-rate mortgage loan, the same amount is paid for each installment during the entire life of the loan.

- Mixed-rate loans: with this type of loan a fixed rate is applied during the first years of the life of the loan, with this period usually between 5 and 10 years, and then for the rest of the term a variable interest rate is applied, with the reference rate typically being the Euribor.

Fixed-rate mortgages usually have a higher interest rate than variable-rate mortgages, in exchange for offering the peace of mind of always paying the same amount for each installment. Although variable-rate mortgages initially tend to have a lower interest rate, this rate can go up or down with changes to the reference rate (the most common is the Euribor).
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As for the repayment period, there is very little difference among the different types of mortgage loans and most have a term of 20 to 30 years. However, some banks do offer mortgage loans that can be paid back over a period of up to 40 years in the case of variable-rate mortgages.

Steps required to make the change

There are two ways to change a variable-rate mortgage to a fixed-rate mortgage: via a mortgage modification or by switching lenders.

With a modification, the terms and conditions previously agreed upon with the bank are changed. In general, these new terms tend to affect the interest rate, or increase the amount of the loan, or extend the repayment period. If you want to change your mortgage loan from variable-rate to fixed-rate while staying with the same bank, you will need to request a modification of your mortgage loan.

You must keep in mind that there are a series of expenses associated with this. Some banks charge a commission for modifying a mortgage, and furthermore, a new notarized public document will be required, which has a cost of around 1,200 euros for an average mortgage of 100,000 euros. Depending on the type of modification, another possible cost is payment of the Stamp Duty for Documented Legal Acts (IAJD in Spanish), which is charged as an amount that varies between 0.5% and 1.5% of the loan's value depending on the region of Spain. You might also be required to pay the cost of re-appraising the property, depending upon the bank's risk policy.

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The alternative to a mortgage modification is switching lenders, which is known as subrogation between entities. This change tends to bring with it modification to some of the terms and conditions of your loan, such as the associated interest rate.
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