How do I change my mortgage from a variable interest rate to a fixed interest rate?

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Euribor continues to grow. In March he celebrated his For the third month in a row, On average 0.237%. Was -0.335% in February; -0.477% in January. And all forecasts indicate that the trend will continue in the coming months and even years to come.

The data is particularly troubling for variable rate mortgage holders as the vast majority of these products are “Tied” to Euribor.. If this rate increases, the amount payable from month to month will also increase. Which is not the case, of course, with fixed mortgages.

Fixed mortgages are usually more expensive, but they quietly suggest that the installment does not change: it always stays the same. For this reason, given that Euribor will continue to grow, switching from a variable mortgage to a fixed interest rate mortgage looks like an attractive opportunity as Can equate to saving money.

In fact, it is common for options to be: on the one hand, a fixed interest rate of 1.5% or, on the other hand, a variable rate of 1% plus Euribor. The latter will be cheaper as long as Euribor stays below 0.5%. Something that has been happening since mid-2014. In fact, it has been in negative terms since February 2016.

But until 2014 Euribor remained above 0.5% Historical maximum – in July 2008 – 5,390%. Given the current inflation trend, in the not too distant future a scenario in which a variable rate is more expensive than a fixed one is not ruled out.

“The forecast is that Euribor Will continue to grow in the coming months and will soon exceed 0%“, They explain from the comparison of HelpMyCash financial product. They added that “banks are raising fixed rates so that their clients can mortgage themselves at a variable rate that they hope will benefit more if Euribor continues to grow.”

How do I change a variable from a mortgage to a fixed one? What options are there? The possibilities are three. Is described in detail below.

1. Mortgage Innovation

The easiest option is a procedure called mortgage innovation. Consists of Change the terms of an existing mortgage. Therefore, the client should contact the bank representative and express a desire to carry out the transaction.

If this requirement is met within the first three years of the mortgage repayment period, the Bank may charge a Commission up to 0.15% From the amount left to the customer to pay. For example, if this debt is 130,000 euros, the maximum commission that a subject can claim is 195 euros.

On the other hand, if the mortgage payment has started for more than three years, the bank Can not charge any commission For a change. This is established by the Law of March 15, 2019, “Regulator of Real Estate Credit Agreements”, better known as the Mortgage Law.

Banks often impose other conditions for innovation. For example, demand Add a related product (Salary, insurance, etc.). You can also ask the client to take care of the new appraisal of the house. The average cost of the latter is 300 euros, although it can cost up to 600.

2. Surrogacy

The second option involves subrogation of the mortgagee. In particular, Change the mortgage in another bankWho wants – as is logical – to accept that interest is fixed and not changeable.

As in Innovation, the bank that issued the original loan in this case can also claim a fee of up to 0.15% of the amount of the waiting period before the mortgage is For the first three years. If after this period, you can not pay anything.

The cost that can be added to a surrogate is a Opening Commission For a new mortgage. But Most banks no longer pay himAnd when they do, the amount generally does not exceed 1% of the total new mortgage.

The Property valuation This is unavoidable in this operation as the bank needs to be aware of this assessment. While it may be that this subject – as a technique of attracting attention or attracting new customers – has offered to take on the value of evaluation.

By the way, Temptation strategies They may include the fact that the bank that issued the first loan does not pay the above-mentioned innovation or subrogation fee – even though the transaction takes place within the first three years of the mortgage. It is good for the client to consider it as a possible resource when negotiating.

3. Apply for a new mortgage

The third way to change the interest rate variable to the fixed one is simple and difficult at the same time: it consists in concluding a new mortgage. That is, a new loan is arranged with another bank and Part of this amount cancels the previous loan.

In this case the commission for innovation or subrogation, of course, does not exist, but other costs arise. On the one hand, caused Cancellation of the first mortgageSuch as cancellation of registration (notary, agency and registration). Its amount is about 1000 euros.

The bank also reimburses a Early repayment fee “Original” mortgage. This can be up to 2% of the expected amount, depending on what is set at the time of signing up.

On the other hand, there may be a fee for opening a new mortgage (although, as already mentioned in the case of subrogation, this is currently very rare). And a home appraisal is necessary, which is an additional expense for the client if the bank does not offer to pay it.

Which is more convenient?

The simplest of the three possibilities and, in principle, the most practical is innovation, since it only involves changing the terms of an existing mortgage and not changing the banks. However, there may be other alternatives to some extent More awkward But – in economic terms – More favorable.

Making a new mortgage is one of the three most difficult processes, but sometimes it’s worth it. Especially if the fixed interest rate in the long run leads to a Known financial benefits For customers.

In any case, for a client who is making a project or decision to move from a variable mortgage to a fixed interest rate, the advice of HelpMyCash specialists is on. Mix all options”.

With this particular data, it will be possible to analyze what is most convenient – first of all, to make calculations about what is more profitable in the long run – and thus make the most convenient decision in each particular situation.

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Source: El Diario

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