Note

Mixed rate mortgage in Spain

§ 1How it works

A mixed-rate loan combines the two types. For an initial period the rate is fixed, so the instalment is predictable. After that, the rate becomes variable and follows an index plus a margin. Lenders offer mixed loans to give borrowers a stable start while leaving the long term open. This page belongs to the chapter in rates and repayment in detail.

§ 2What the law says

We found no legal minimum for the fixed period of a mixed-rate loan in the article we read. Article 8 of the mortgage credit law only treats loans whose rate is fixed for an initial period of at least five years, then renegotiated to a new fixed rate, differently when the lender works out the illustrative APR and the warning about rate rises. The fixed period of your loan is whatever the contract says, and the offer must state it clearly. We read article 8 only; the text we could read stops at article 19.

§ 3The two halves

In the fixed period, the key terms are the fixed rate and the length. In the variable period, the key terms are the index, the margin and the revision dates. The index is usually a Euribor, as the rules on Euribor explains. The margin in the variable period can differ from the margin in other offers, so compare it.

§ 4The cliff

The risk of a mixed loan is the end of the fixed period. If rates have risen, the instalment can jump. Test your budget against a higher index at the date the fixed period ends, and with your income as it might be then. A mixed loan that is fine for the first years but unaffordable afterwards is a trap.

§ 5Leaving at the end

Many borrowers plan to refinance or repay at the end of the fixed period. That plan depends on the market, your income and the value of the home at the time. Do not count on it. Ask what repaying early costs, which the rules on repaying early explains for fixed and variable loans. We found no official cap specific to mixed loans in the pages we read.

§ 6Compare

Compare a mixed offer with a pure fixed and a pure variable offer on the standard information sheet. The rules on fixed or variable discusses those types. Look at the total cost and at the instalment in the variable period under different assumptions.

§ 7Ask for examples

Ask the lender to show, in writing, the instalment after the fixed period at three different values of the index. If it cannot, treat that as a warning.

§ 8Questions for the lender

Ask how long the fixed period lasts, which index applies afterwards, what the margin is, how often the rate is revised and what compensation applies to leaving early. Ask for the answers in writing.

§ 9Planning for the end of the fixed period

Put a date in your diary six months before the fixed period ends. Ask the bank for the new terms then, compare them with other lenders, and decide whether to stay, move the loan or repay part of it.

§ 10More on this topic

The rules on euros or pounds explains the currency choice.

Financial note. No rate is printed unless it comes from a dated, official publication. Capital is at risk, exchange rates move, and no lender, broker or provider is recommended here. Mortgage terms are set by each lender; ask a registered intermediary about yours.