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If you are going to buy a house or apartment and need a mortgage, you will surely compare the offers from different banking institutions. It is an important transaction and you will want to have the peace of mind of having the best financial product for your needs. To help you do it correctly, we are going to break down the essential parameters that you should consider in your analysis.
What should you consider when comparing mortgages?
Taking out a mortgage is one of the most important decisions in a person’s financial life. Therefore, below we explain the most relevant aspects that you should consider in order to choose the most appropriate one for your situation.
Interest rates
Interest rates on this type of loan are essential in determining your choice. This is because they can make a significant difference in the final cost. In this regard, data provided by the National Institute of Statistics (INE) show that 32.8% of mortgages taken out on homes have been at a variable rate and 67.2% at a fixed rate. The Euribor is the rate chosen for mortgages in the first group.
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Therefore, you should not compare mortgages globally, but rather carry out the analysis separately: with fixed and variable rates. In the case of the latter, you should also make sure that the comparison is carried out with the same reference index, although currently, the vast majority use the Euribor. In the same way, when choosing the mortgage you should remember that a differential will be added to this interest rate. As a result of this mathematical operation, you will be able to calculate what you will have to pay to contract this product. But you should be aware at all times that variable interest mortgages can change from one year to the next, so it is difficult to accurately anticipate their real cost.
Fixed-rate mortgages, on the other hand, will give you the security of always paying the same monthly payment, whatever happens in the financial markets. For this reason, it will be easier for you to calculate the final outlay, since you will not have to carry out any operations to estimate what its deviation may be in the coming years.
Maximum mortgage terms
This is another of the most relevant factors when comparing mortgages. In any case, you should take into consideration the maximum term of the product: 20, 25, 30. But keep in mind one premise: the longer the term, the greater the total amount you will have to pay out.
In exchange, you will have a more affordable monthly payment, which may be more favorable depending on your financial situation. From this point of view, when making a mortgage comparison, it is important to know the savings that you will be able to allocate at the time of applying for it. It can be a way of saving more money in the event of a house change.
Commissions and penalties
Not only the interest rates and the term are decisive when estimating the total cost of the mortgage: but these products generate another series of expenses resulting from their commissions. The commissions are various and of a diverse nature, such as the opening, partial or total cancellation, among some of the best known. You must take them into account because they can represent a significant outlay.
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Other factors to consider when choosing a mortgage
There are still other elements that should not go unnoticed in your mortgage comparison. This is the case of the purpose of the mortgage. Because the financing conditions will not be the same depending on whether it is a first home, a holiday home (second home), or one purchased as an investment. This is taken into account by the entities to assess the total amount to be granted: in general, for a first home it is usual to grant up to 80% of the appraisal value of the house, with some entities even reaching 95% if the owner is a young person, while for a second home the normal amount is usually 65%, 70% or 75%, depending on your characteristics and your savings capacity.
In any case, a careful and thorough comparison will help you find the product that best suits your needs: even if you have to invest some of your time now, doing the analysis to choose will surely be worth it.
Read Other: Guide To Buying Land From Any Part of the World
