Can I fix the rate on my home credit?
Are you considering options to lower your monthly mortgage payment? Fixing the interest rate may be a solution. Let's see in this article what it means to fix the mortgage rate, how to do it, and what the impact is.
Do you have a variable rate and want to switch to a fixed rate? Leave it to Poupança no Minuto. Credit intermediaries are available to move forward with your process quickly and for free. To better understand the impact that this change may have, continue reading the article.
What does it mean to have a fixed rate on a mortgage?
Having a fixed interest rate on a home loan means that when you choose the interest rate regime for your contract, you have opted for a rate that does not change.
That is, the interest rate on your mortgage remains fixed until the end of the term, as well as the monthly installment amount of the loan.
The value of the fixed interest rate is defined by banks, varying according to each specific credit. It depends on the customer's risk, the ratio between the loan amount and the property value (loan-to-value), the cost of financing, and the risk of fixing the rate throughout the contract period.
Unlike the variable interest rate, the fixed rate is not subject to fluctuations in any benchmark like the Euribor. Therefore, the rate value is never revised and, consequently, decreased or increased.
But due to offering greater predictability, the value of the fixed interest rate is usually higher than the variable one. Except for times when interest rates are rising (like now), when Euribor rates are at high values and therefore, in some cases, the variable rate already exceeds the value of the fixed rate.
However, note that when Euribor rates decrease again, it may be cheaper to have a contracted variable interest rate.
Can I switch to a fixed rate in the middle?
Yes, it is possible to change the interest rate regime at any time during the contract, as long as you request a renegotiation of the conditions from the bank or a credit transfer to another banking institution.
However, for a renegotiation of the credit contract terms, the Bank of Portugal determines that "it is only possible with an agreement between the bank customer and the credit institution".
In addition to being able to change the interest rate regime to fixed in the middle of the contract, with a renegotiation you can also change the spread, the term of the index, the term for loan amortization, as well as the reimbursement modality. What can also happen with a credit transfer, achieving different conditions, such as an interest rate regime that guarantees a lower monthly installment.
What is the impact of having a fixed rate on my credit?
To understand the impact of having a fixed rate currently on housing credit, we will consider a loan of 200 thousand euros in debt, a term of 360 months for repayment, and a Nominal Annual Rate (NAR - spread + fixed rate) of 4.75%.
With these housing credit conditions, the monthly payment to be made is 1,043.29 euros.
Comparing with a variable interest rate, and considering the same credit conditions, if you have the Euribor term contracted for 12 months, the rate now corresponds to 3.682%. In other words, with a spread of 1%, the APR of the credit is 4.862%. Therefore, in this case, the monthly installment of the credit amounts to 1,056.84 euros.
This means that currently, in most cases, it is possible to see that the variable interest rate is higher than the fixed one. In practice, in the example above, it is a savings of 13.56 euros per month, or 162.72 euros annually.
It is considered that it may make sense to change the rate of your housing credit to the fixed modality, the first step is to contact the bank. But, if you prefer a mediation of the process, the credit intermediaries Poupança no Minuto handle all the bureaucracy and negotiation with the banks for you, at no cost.