Fixed-rate or variable-rate mortgage

Main features of and differences between variable-rate and fixed-rate mortgages
A fixed-rate mortgage and a variable-rate mortgage are different primarily due to the interest rate applied, which can mean that financial institutions offer different conditions for each. When determining the advantages and disadvantages of choosing a fixed-rate or a variable-rate mortgage, it is important to take into account three main factors: interest rate, term and monthly repayments.
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Interest rate

With a fixed-rate mortgage the same interest rate is applied for the life of the loan. This means that payments are always the same - they never increase or decrease. So the customer knows the amount due up front, avoiding any surprises resulting from increases in the Euribor (or other reference rate on which a loan may be based).

With a variable-rate mortgage the interest rate is composed of a fixed differential plus a reference rate (typically the Euribor). This means your monthly payment will increase or decrease in accordance with how the reference rate changes.

Usually, financial institutions offer their fixed-rate mortgages at an interest rate that is higher than that offered in their variable-rate mortgages.


Financial institutions usually offer fixed-rate mortgages for shorter repayment terms.

Variable-rate mortgages are usually for longer terms.

Monthly payment

With a fixed-rate mortgage the payment term is usually shorter, so the possibility of getting reduced monthly payments is limited. However, once the term is set, the monthly payment will remain the same. It will neither increase nor decrease.

With a variable-rate mortgage a longer term is usually offered at the time of mortgage repayment, which allows for the possibility of reduced monthly payments. At the same time, once the term is set, the payment amount can change as a result of changes in the reference rate (Euribor). The interest rate of the mortgage is usually updated every six months based on the Euribor.

Taking the amortization term itself as a reference, the amount of the monthly repayment of a variable-rate mortgage is usually lower than that of a fixed-rate mortgage, as variable-rate mortgages are offered at a lower interest rate.

For example, for a 25-year mortgage on a new house as a main residence that costs €150,000 and you apply for a mortgage of €100,000 in the province of Madrid, the monthly fees at March 2017 would be:

  • Fixed-rate mortgage: 453.66 euros.
  • Variable-rate mortgage: 411.78 euros.

For more details, go to our mortgage calculator.

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The decision

Fixed-rate mortgage: The right choice for those who prefer the security that comes with always paying the same amount in monthly repayments and protection from any increase in market interest rates. The ability to pay off the mortgage loan in a shorter period of time must be assessed.

Variable-rate mortgage: The right choice for those who want to pay a lower amount in their monthly repayments, and which are linked to interest rate reviews based on the Euribor.

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