Variable-rate or mixed mortgage

Main features and differences between variable-rate and mixed mortgages
The only difference between a variable-rate mortgage (variable mortgage), and a mixed mortgage is that there is an initial period where the interest rate stays the same. In order to compare a variable-rate mortgage and a mixed mortgage, we must first analyze three basic factors: interest rate, term and the monthly repayments of these two mortgages. In practical terms, there is not a huge difference between both types of mortgages, think of the mixed mortgage as a type of variable mortgage.
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Interest rate

In a variable-rate mortgage, the interest rate is made up of a fixed differential plus a reference rate (usually the Euribor). This causes the interest rate to increase or decrease in accordance with the fluctuations in the Euribor.

In a mixed mortgage, a fixed interest rate is applied during the first years of the loan. During the rest of the term, it works as a variable-rate mortgage. The interest rate will be subject to a reference rate (usually the Euribor).

Banks usually offer variable-rate mortgages at a lower interest rate than mixed mortgages.

Term

Banks usually grant similar loan repayment terms for mixed mortgages as for variable-rate mortgages.

Monthly payment

In a variable-rate mortgage, the monthly repayment varies in accordance with the reference index (Euribor). The interest rate of the mortgage is usually updated every six months based on the Euribor.

In a mixed mortgage, you pay the same amount in monthly repayments during the first years, while the loan functions as a fixed-rate mortgage. During the rest of the term, it will function as a variable-rate mortgage and the amount of the monthly repayment will depend on the value of a reference rate (Euribor).

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The decision

Variable-rate mortgage: The choice for those who want to pay a lower monthly repayment, with the risk of an increase with each interest rate review, in accordance with the variations in market interest rates.

Mixed-rate mortgage: The option for those who want to ensure a specific interest rate during the first years of the loan, and then opt for a variable interest rate mortgage for the rest of the loan amortization term with the aim of obtaining a more competitive interest rate.

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