Interest rates on a mortgage loan

Before defining the interest rates on a mortgage loan, the mortgage credit and its essential characteristics will be defined. Mortgage credit is a financial product in which a bank or financial institution grants a loan to a client, and at the same time the property acquired with the loan remains as collateral. This does not relieve the borrower of debt, but supplements it. On some occasions the lender may request a guarantee to strengthen the commitment. Other essential characteristics of mortgage loans is the existence of an agreed term for the payment of the debt that is established in the initial contract. In general, contracts are a means to request a loan, where with it the purchase of land or spaces of land and houses is made.

In Spain there are companies like Financial ICU who make real estate loans. UCI has a series of characteristics that make it attractive to anyone when looking to build or buy a home.

So what are the interest rates on mortgage loans?

Interest is how the financial institution charges the lender, and is expressed as a percentage. To determine the percentage of interest that the financial institution will charge, two factors are considered: on the one hand, the quality of the guarantee (if the collateral is strong, the interest will be lower and vice versa) and on the other hand there is the maturity term (the interest will be lower if the credit period is less).

Listed below are the 3 interest rates on a mortgage loan:

Fixed interest: It is an interest that remains static throughout the mortgage loan payment period. It does not matter if interest rates increase or decrease in the financial market. The advantage of this interest rate is that it protects the borrower against market instabilities, that is, if the interest rate increases, it does not affect the mortgage loan rate. And the downside is that the borrower could not benefit from low market interest rates either.

Variable interest: This interest rate can be reviewed every 6 or 12 months and the rate is adjusted either with an increase or a reduction. Unlike fixed interest, this rate is influenced by changes in the market, since before a increase, the mortgage loan rate may increase and, conversely, it may decrease if the mortgage rate market goes down.

Mixed interest: At this interest rate, the borrower pays the debt at fixed interest between 2 and 5 years and after that period, you can choose a variable interest or that the lender negotiates another interest rate fixed.