How to change your variable mortgage to a fixed rate

The Euribor continues to shoot into the pockets of those who must pay a monthly installment on their mortgage. Since September, this index has stood at 2.233% and forecasts suggest that it will rise to 3 percentage points. This translates, according to Asufin estimates, into more expensive mortgages between 130 and 1,500 euros per year if a 25-year loan of 100,000 euros is taken as a reference. These are unforeseen expenses that not everyone can afford, which is why many choose to change their mortgage to a fixed rate.

“We are aware that in recent months there has been a lot of transfer of variable mortgages to fixed rates, especially from clients who took out their variable mortgage in the last five or six years,” explains the mortgage expert, Miquel Riera. In fact, fewer and fewer variable loans are being signed. Only 27% of the mortgages signed in June were variable rate.

The problem, he points out Riera, is that in recent months “this change is increasingly complicated.” The reasons are based on the fact that banks are not interested in offering fixed rates now that the Euribor is rising and, on the other hand, banks offer increasingly higher fixed rates, even above 4%.

Therefore, “for those who are interested in making this change, our advice is to run,” adds the expert, “because the longer it takes to make the change, the higher the fixed interest offered.” And there is no better time to do it than now.

The Government has managed to reach an agreement with the bank employers (AEB, CECA and UNACC) which includes a greater reduction in expenses and commissions to facilitate the change from a variable rate mortgage to a fixed rate one. Likewise, the commissions for early repayment and change of mortgage from variable to fixed rate have been eliminated for the entire year 2023.

Before making a decisive decision, it is necessary to calculate if the change is profitable. For it to be so, experts point out that the fixed interest on the new mortgage should be around 3% or below. “An interest of 3% is still competitive, especially if we take into account that the Euribor on average has traded between 2 and 3% throughout its more than 20 years of history,” he points out. Riera.

If it is not possible to find a fixed-rate mortgage offer below that percentage, there are always alternative solutions to lower the monthly payment. One of them is to choose the mixed-rate mortgage. In that case, the loan would enjoy a fixed interest for the first 5 or 10 years, below the interest of the fixed mortgages that are being offered right now. The main drawback of mixed mortgages is that this protection is temporary and the price could skyrocket if the Euribor has risen in recent months.

three options

The change from a variable mortgage to a fixed rate can be done in three ways. The first one is through a novation, that is, agreeing with your bank to change the contract to fixed interest. It should be noted that the financial institution can reject the proposal or accept it in exchange for other conditions, such as including commissions or associated products. Of course, the last word is always whoever pays the mortgage.

In the event that negotiations with the bank fail, there are other options. The second way to change the mortgage to a fixed rate is through creditor subrogation. It consists of transferring the mortgage loan to another bank that agrees to pass on the fixed interest rate. “In this case, you would simply have to find a bank that was willing to assume your mortgage loan and change the interest rate from variable to fixed,” he explains. Riera.

The third way is to contract a fixed mortgage directly, either with your bank or with any other, and use the money they lend you to pay off the previously contracted variable mortgage. In all three cases, the main requirement is not to have an insolvent profile “because obviously no bank is willing to face these changes if you cannot pay your mortgage payment or if you have had recent defaults,” explains the HelpMyCash mortgage expert. com.

Whether you opt for renewal or subrogation, the costs to take into account are similar. For the novation, it is necessary to pay an appraisal of approximately 300 euros if the financial institution requests it, in addition to a commission that does not exceed 0.15% of the outstanding amount of the mortgage. In addition, if the mortgage is older than three years, this commission is not charged by the Mortgage Law of 2019. On the other hand, contracting a new mortgage entails more expenses. In that case, the appraisal will have to be paid, plus the expenses for canceling the mortgage (around 1,000 euros) for removing the loan from the property registry and paying the commission for early repayment, between 0% and 1%. of the capital.