Spanish Variable Rate Mortgages
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Spanish Variable Rate Mortgages

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Thursday, 23 Oct 2008

Variable rate mortgages in Spain are loans where the interest rate is periodically adjusted in accordance with preestablished rules.

The applicable interest rate at any given time is determined as follows: · An initial interest rate is agreed and remains unchanged for a given period of time.

Spanish Adjustable rate mortgages

With most lenders, this period will range from 3 to 12 months.

Upon conclusion of this period, the interest rate will vary in accordance with the evolution of the reference rate agreed in the loan agreement.

With adjustable-rate mortgages, both the lender and the customer are affected by market fluctuations:

When interest rates are low, the customer will make smaller payments.
When rates are high, the customer will have to make larger payments.

As a result, because interest rates depend on the market, lenders tend to offer longer terms (usually between 20 and 40 years) for adjustable-rate mortgages than for fixed-rate ones (usually between 15 and 30 years).

What are the advantages of an adjustable-rate mortgage?

The main advantages are: