In the previous post we explained what mortgage loans were and what were their most common characteristics. In this way, we put ourselves in the field to understand the world of financial products a little better.
In summary, a mortgage loan is a financial product in which a bank lends us money based on a security right. So far everything is clear! The problem arises when the interest rate is applied to a mortgage loan, which for the less expert in the subject, is based on the monthly installment that we will pay each month.
This post comes to explain the 3 types of mortgages that we can acquire according to the interest rate that is applied.
Fixed-interest mortgages are mortgage loans that maintain, from beginning to end, the same interest since they are not referenced to any index such as Euribor.
In this type of mortgage loans from the first moment the client knows exactly what the interest of his mortgage will be forever, as well as the value of the installments and the total amount thereof.
In mortgages with a variable interest rate we find two important components, a fixed differential and the value of a benchmark. The interest on the mortgage loan varies as the index quotes daily and each month provides a different average price. Because of this, mortgages with a variable interest are reviewed semiannually or annually and the value of the euribor for the previous month or two months is applied.
In mortgages with mixed interest we can see how periods are combined with a fixed interest rate and periods with a variable interest rate. Normally, at the beginning of the mortgage the interest is fixed and in the second tranche the interest is variable.
This decision will depend both on the financial institution with which you work and the current economic market. Normally, these types of mortgages begin with the first part fixed term and the second part variable.
If you are thinking of applying for a mortgage to buy a house, open a business, … now you have all the necessary information to do it. Get the maximum guarantees and the best financing to suit you.