Mixed mortgage: what is it and what are its advantages?

Broadly speaking, when talking about a mortgage for a property, the first thing that comes to mind isn’t a mixed mortgage, due to not being the most popular. Fixed or variable interest rate options tend to be more common.

Don’t turn your back on this type of mortgage that, on some occasions, might be the best option. It isn’t too complex; you just need to be aware of the ins and outs.

What is a mixed mortgage?

The mixed mortgage combines an initial fixed interest period followed by a variable interest period. Broadly speaking, the first years of this type of mortgage come with a fixed interest rate, offering stable monthly instalments, followed by a variable period in which the interest rate is linked to a reference rate, such as the Euribor.

So, combining them offers the best of both worlds to adapt to borrowers’ needs and profiles.

Is a mixed or fixed mortgage better?

Choosing between a mixed or fixed mortgage depends on several factors, such as financial stability, risk aversion and the borrower’s ability to repay.

First of all, you should be aware that fixed mortgages offer a fixed interest rate over the life of the loan, so you know how much you have to pay each month.

On the other hand, mixed mortgages combine the initial stability of fixed mortgages with the possibility of benefiting from variable interest rates further down the line. So, if a borrower values certainty and stability, a fixed mortgage might be the one to go for. It’d be better not to do so if you think that at some point it might be worth risking a change in interest rates.

Is a mixed or variable mortgage better?

Deciding whether a mixed or variable mortgage is better will depend on the borrower’s risk tolerance and ability to deal with interest rate fluctuations.

Bear in mind that variable mortgages are linked to indices such as the Euribor and could undergo periodic changes in interest rates, which might lead to variable monthly repayments. Depending on market behaviour, these rate changes can either benefit or go against you as a borrower. You therefore need to weigh up whether you can afford to risk changing interest rates.

On the other hand, mixed mortgages provide an initial phase of stability with fixed rates, which might be attractive for those looking for a period of fixed instalments before taking on variable rates. This could be a great option if you think that variable rates could be detrimental at first, but could benefit you further down the line.

It’s worth mentioning that, in some cases, banks offer the option of subrogating the mixed mortgage, which is a defence mechanism against Euribor fluctuations, so the possibility of doing so should also be borne in mind before going for one over the other. Subrogating a mortgage, mixed or otherwise, is when the mortgage is moved from one financial institution to another.

What are the advantages of the mixed mortgage?

Advantages of a mixed mortgage include:

• During the fixed interest period, the monthly instalments remain unchanged, which makes financial planning easier.
• Once the fixed period elapses, you can benefit from lower interest rates if reference rates go down.
• Combining fixed and variable rates provides versatility to suit the borrower’s needs.
• Borrowers can limit their exposure to interest rate risk by going for a mixed mortgage.

What are the best mixed mortgages?

If you’ve already made up your mind and go for the mixed mortgage, below are what we believe are the best mixed mortgages currently on offer in Spain. Keep them in mind if you meet the requirements and have the necessary documentation to apply:

Bankinter

offers a “Mixed Subsidised Mortgage“ with an attractive fixed interest rate for the first few years and a competitive variable rate thereafter. Specifically, an TAE of 3.77% and 2.45% TIN for the first five years, as well as Euribor +0.75%.

EVO Banco

Offers a “Smart Mixed 15 Mortgage“, that doesn’t require a significant relationship with the bank and lets you choose a fixed period of between five and fifteen years.

Cajamar

Another one of the best mixed mortgages, thanks to its TIN of 2.40% for the first five years.

Ibercaja

Offers a mixed mortgage that combines fixed and variable rates with competitive interest rates that we just had to mention. Specifically, you can go for a Euribor +0.85% and a five-year fixed rate starting at 2.25%, a very reasonable rate that’s hard to beat.