What is a mixed mortgage and why take it out?

The mixed mortgage is a financial product that combines a fixed interest rate for a certain period of time and then adjusts to a variable interest rate. In Spain, this option has gained popularity in recent months due to the rise in interest rates. In this article, we are going to explain what a mixed mortgage consists of and the reasons why it can be a good option in the current context.

What is a mixed mortgage?

As the name suggests, a mixed mortgage is a combination of a fixed and a variable interest rate mortgage. Generally, during the first years of the mortgage, the interest rate is fixed and then becomes variable. The duration of the fixed rate is usually between 3 and 10 years, depending on the bank and the type of mortgage. After that period, the interest rate is adjusted from time to time (usually annually) according to a reference index (such as Euribor).

The mixed mortgage is somewhere in between the fixed-rate mortgage and the variable-rate mortgage. The fixed-rate mortgage offers a stable interest rate throughout the life of the mortgage, but is usually more expensive than the variable-rate mortgage. On the other hand, the variable rate mortgage has a lower interest rate at the time of taking out the mortgage, but is subject to market fluctuations.

Except for the interest rate, the mixed mortgage works like any other, allowing you to ask for a percentage of the appraised value of your future home, offering a repayment term between 30 and 40 years maximum, and being able to apply different commissions such as the opening or early repayment (if you want to repay your instalment or part of it early).

Why choose a mixed mortgage?

There are several reasons why a mixed mortgage can be a good option, especially in the current context of rising interest rates.

Stability of mortgage payments

The blended mortgage offers stability in mortgage payments for the first few years, allowing homeowners to plan their finances for the long term. Knowing that the interest rate will not change for a set period of time allows them to budget and plan their financial future with greater confidence.

Protection against interest rate hikes

The blended mortgage also protects homeowners against interest rate hikes in the future. If interest rates rise during the fixed-rate period, homeowners will not be affected, as their interest rate will remain the same during that time. If interest rates rise after the fixed rate has ended, the increase in the monthly payment will be less than in a variable rate mortgage, as the fixed part of the interest remains the same.

Is a mixed mortgage right for you?

It is necessary to study each case in depth to know if the best option is a mixed mortgage. For this, it is not enough to look at the current economic situation, you must think about your future and try to anticipate what will happen in the next 10 or 15 years.

The mixed mortgage is especially suitable for people with a high savings capacity. If you have a high probability of generating savings in the coming years and your intention is to amortise the mortgage before the end of the defined term, mixed mortgages can be an option to consider, because you can get lower fixed instalments than a conventional fixed mortgage.

We hope that with this article you are now clearer about what a mixed mortgage is and what you should take into account to decide whether or not to opt for it. Of course, before making a decision, it is very important to investigate all the options offered by the different banks and to carry out an extensive mortgage study.