When purchasing a home, most people turn to a mortgage. This type of loan is characterized as a guarantee of payment, undertakes to purchase the same property. It is what is called “mortgage” housing.

Sometimes you can also mortgage a home and free of charge to obtain financing at lower rates or amounts greater than the personal or consumer loans.

In Spain, almost all mortgage loans, 98%, are recruited at variable interest (see article on EURIBOR). Interest is calculated every six months or a year by reference to EURIBOR for that period and a small amount added (Example, EURIBOR +0.5).
Variable interest mortgage loans in stable economies

In contexts of low interest rates and low inflation, often not even consider the make fixed rate mortgages, since they usually have a much higher interest rate as variables. Therefore, in economies that are involved and expect stable medium to long term, which is the duration of the mortgages, we always opt for variable interest mortgage loans.
When inflation rises

But what happens when the economy suffers a more confusing time? When prices (inflation) rise over the account, the central banks increase interest rates to curb consumption and (the money is more expensive, then the credits are reduced, as well as the investors do not move your money if the simple deposits and offer an acceptable interest). This affects the variable rate mortgages also are affected by these increases when they get the time of his semiannual or annual review.

We watched the news and know many people who have seen their mortgage payments have risen to several hundred dollars, as appropriate, in recent years.

The question then, for someone who wants a mortgage is: I opted for the fixed rate and eliminate the uncertainties?
Advantages and disadvantages of fixed rate mortgages

The stability of the payments is the main advantage is supposed to fixed rate mortgages. There will be affected by rate increases, although this is a double edged sword, because when interest rates fall again, neither will benefit from this fall and we’re paying a price above the market.

Moreover, the interest rate differential between the floating-rate mortgages (averaging 4% APR for 25-year amortization) and fixed rate (average of 6% for 25 years) gives us a margin so that despite increases types, we continue to pay less than a fixed rate loan.

In any case, if the economy is stable, as in Europe, will the maxim that what goes up, down. And as long-term credits as there are now, even reaching the 40 year amortization, the payment is smaller and less noticeable increases.
Mixed rate mortgages

Another product offered by mortgage entities is the mixed type. It is often set a fixed term (eg 5 years at the beginning or end) and the remainder at a variable rate. This would be a good product if one borrows in a context of uncertainty and continuing rise in interest rates. We’ll be quiet for 5 years, hoping the situation will be resolved.
Conclusion as to which type of mortgage we are more interested

In short, fixed interest are more expensive and usually have a lower maturity, which requires more solvent throughout the duration of the loan. In return, we will affect the rise in interest rates, which can become overwhelmed in certain times of the rise of our dues.

In any case, variable rates are desirable because they are cheaper and allow greater maturity, so that quotas will be lower and more affordable, and to changes, we can always think long term that we find moments of all types: of ascent and descent.