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¿Fixed, variable or mixed rate mortgage?

The mortgage is one of the main aspects of buying a home, so it is important to understand how the types of mortgages available to buyers work. Fixed rate and variable rate mortgages offer different options and pros and cons to consumers who should consider and understand the pros and cons of these different types of mortgages before making a decision.

Fixed-rate mortgage.

Offer buyers and borrowers the security and peace of mind of the same interest rate throughout the life of the loan. For example, if the mortgage is a 20-year fixed-rate mortgage, borrowers will pay the same every month for 20 years, no matter how much the market benchmark moves. These types of mortgages are excellent for those who want certainty and better control over their monthly budget.

Variable rate mortgage.

Variable rate mortgages

Can be more attractive in terms of their interest rate, meaning borrowers could pay less in the month compared to fixed rate loans. These mortgages are linked to a market benchmark, usually the IRPH or Euribor, and borrowers will not know in advance the monthly payments over the life of the loan. For example, if the Euribor decreases, the monthly payment also decreases, but if the Euribor increases, the monthly payment will also increase. For this reason, borrowers need to be prepared to anticipate monthly changes.

Mixed-rate mortgage

Mixed-rate mortgages are a mixture of the two above. These mortgages offer borrowers a fixed and a variable part, rather than a single fixed or variable rate. Borrowers can combine these two rates according to their needs and budgets. For example, a blended mortgage would offer borrowers 50% of a mortgage at a fixed rate and the remaining 50% at a variable rate. This would allow borrowers to enjoy a secure fixed rate, while taking advantage of the benefits of variable rates.

How to know which type of mortgage to select

Mortgage selection will depend on the borrowers' objectives. For example, buyers who want more security might choose a fixed-rate mortgage, while buyers who want a lower monthly payment might opt for a variable-rate mortgage, while being aware of the upside they may experience. For those who want a combination of the two, a mixed mortgage might be the best option.

In conclusion, there are a variety of mortgage types available to buyers or borrowers. The key to choosing the best mortgage for each buyer is to understand the differences between mortgage types and to understand each type before making a decision. By understanding these differences, buyers will have all the information to choose the mortgage that best suits their needs.

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