If we do not pay the credit, the bank or savings bank can keep the house that we bought with the credit.
Given the prices of flats and houses, it is practically impossible to buy them in cash. We will need a long-term loan. Banks do not give these credits without that guarantee.
Do they cover the entire purchase price?
Normally, mortgage loans cover between 70% and 80% of the price of the house.
Are there many expenses?
The expenses of the deed of the purchase of the house plus those of the credit plus taxes can reach 10% of the price of the house. It is advisable, therefore, to have 20/30% of the price of the apartment you want to buy saved.
What is a floating rate?
Fixed or variable rates can be contracted. The fixed ones guarantee that the monthly payment will be the same throughout the life of the loan. They are safer and more desirable, but you have to compare them with the down payment of variable rate loans to see if they are worth it.
Are there commissions?
You have to select the bank or savings bank also depending on the fees that apply to the loan. An opening commission is usually applied (really because): it is a percentage on the loan at the initial moment that makes the operation more expensive. It is important to check that early cancellation fees are not applied as we will have this additional cost if we want to change banks or cashiers in the middle of the loan.
How long should I request it?
Mortgage loans are normally long. Between 20 and 30 years are the most common terms at the moment. If the term is extended, it is possible to reduce the monthly payment, but we do not advise more than 30 years, because the interests are very high and instead of a purchase it is more similar to a rent, since the part of the loan than during the first years is dedicated to decreasing the amount of credit is very low.
Each monthly installment is divided into two parts. One will pay the interest on the loan and the other will reduce the money we owe. During the first years of the loan, up to the middle of its total life, the part that is destined to reduce the amount we owe is very small. Almost everything we pay goes to interest and our real “savings” is very low despite the effort we are making.
Would they give it to me?
Banks and savings banks look at two things to grant mortgages: First, that the percentage of financing on the cost of the house is low and that in any case it does not exceed 70-80% of its price. Second, that the percentage that the monthly loan repayment installment will represent on the applicants’ total income is as low as possible and that in any case it does not exceed 40% -50% of the same. If we ask for 80% of the price of the house and the monthly payment that comes out is less than 35% of our income, we will surely find a bank or savings bank that will grant it to us despite the crisis and credit restrictions.
Which mortgage is the best? What should I look for?
The first thing is that the commissions that apply to you are as low as possible. The second that the interest rate is lower in the fixed rates or that the spreads are smaller in the variable ones. The interest rate review is normally annual. The mortgage is better if the review is done after the first two years.