Choosing a mortgage is one of the most important financial decisions in the life of any consumer. The reason? It is a very long-term loan, which requires a large amount of money and conditions that are sometimes not easy to understand.
To help you take the right steps before hiring a mortgage, we have selected the fundamental questions that you will have to analyze to find a good offer:
1- Decide between a fixed mortgage and a variable
As with any loan, a mortgage also involves the payment of an interest. However, in this case you can find two options among which you must choose:
Variable Mortgage: the variable interest is calculated by adding two elements: a reference index (normally, the 12-month Euribor) and a differential, which is a percentage fixed by each bank and which never changes. For example, if the 12-month Euribor was at 0.5% and the mortgage you want to ask for has a differential of 1%, the interest you would have to pay would be 1.5%. Now, the Euribor is revised. Every month, so, depending on the level that this indicator mark, the interest to be paid may increase and decrease and, with it, the monthly payment for the mortgage.
Fixed Mortgage: As its name indicates, it is an interest that does not change throughout the life of a mortgage. Each month you will have to pay the same fee.
2- Set an appropriate return period for your circumstances
When choosing how many years you will have to repay your debt, remember that the longer the term, the lower the monthly payment will have to be, but the interest will be higher.
3- Do not lose sight of the maximum percentage you need to finance
Generally, banks do not usually grant more than 80% of the appraised value (or purchase) of the home you want to buy. That is, if the property you want to acquire costs 180,000 euros, the normal thing is that the entities do not give you more than 144,000 euros. Of course, there may be offers where that percentage is somewhat higher (or lower) and it will be necessary to take accounts to know if your proposal really fits with your economic circumstances.
4- Analyze all the commissions that you will have to pay
In addition to the expenses associated with the purchase of a home and the formalization of a mortgage, you should not forget that many offers include other additional expenses. The most common are study and opening commissions, early repayment (total and / or partial) and novation . When choosing a good mortgage, do not forget to compare all these costs to know which can be the cheapest option.
5- Examine what extra products you should contract with each mortgage
In some cases, banks may offer a lower interest when contracting some of their financial products, such as: Life Insurance, Home Insurance, Current Account or Pension Plans.
Take into account all factors, compare and calculate well the monthly cost of your future mortgage is something that is worth investing time.