When applying for mortgages or personal loans , it is a good idea to carefully study the conditions offered. The small print could make the difference between a good deal and one that is not suitable for us.
There are so many banking and financial institutions, with so many proposals, that it is not always easy to choose the best offer.
In this article we have prepared a list of tips so that you can choose the best mortgages with conditions that are worth it.
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Important Tips for Choosing the Best Mortgages
1. Check the Annual Interest Rate
The annual interest rate associated with your loan is the indicator that tells you whether you have chosen a cheap mortgage or one that is not suitable for you. A simple difference of between 2% and 2.5% is considerable.
Imagine that you have requested a mortgage of €224,000 .
- With an annual interest rate of 2% you would end up paying €101,400 in interest alone .
- With an interest rate of 2.5% you would pay €130,720 in interest.
That is, you would be paying a difference of €30,000 for a difference of 0.5% in annual interest.
The best way is to get a good annual interest.
2. Reduce the Amortization Period
The longer the mortgage term, the more you will have to pay in interest. This is one of the key tips that will help you to really save money.
Experts recommend not accepting a mortgage for more than 15 years , although it would be interesting to find one for only 10 years .
The repayment period is so important that poor planning could lead you to pay twice as much for your home as it was purchased for.
We also have to be realistic: choose a home that is within your means and that you will be able to pay for without any problems.
3. Keep commissions in mind
Many banks launch promotions stating that they have the best conditions on the market. However, depending on the fees they charge, this may or may not be true. These are some of the fees included:
- Commission for opening and study: it is applied when taking out the loan and ranges between 0.5 % and 1% .
- Subrogation fee: this fee will only apply if we decide to change the mortgage bank. The value may vary depending on each bank and the conditions of each mortgage.
- Commission for cancellation (total or partial): This is also known as the commission for cancellation of the mortgage . According to the law, it cannot exceed 0.5% during the first 5 years and 0.25% in subsequent years.
4. Fixed or variable mortgage?
When applying for a mortgage, there are several options, the most common being fixed or variable .
- Fixed-rate mortgages: These are characterized by having the same interest rate for the duration of the loan. This is a good option for those who want a certain peace of mind and always want to control what they are paying. The payments will not go up or down.
- Variable rate mortgages: as the name suggests, a variable rate mortgage involves assuming variable instalments that are linked to a reference index (usually the Euribor ). In addition, there will also be a fixed spread.
Although mortgages have always been variable, with the increase in the Euribor in recent months the situation has changed. Those who took out a fixed mortgage have managed to save money despite maintaining the same instalment.
5. Associated products
One of the tricks banks play is to offer you supposedly cheap conditions. However, when push comes to shove, they can have all kinds of associated products that make them more expensive.
They will be offered to you with the aim of reducing the total cost of the mortgage, but you must bear in mind that they will have additional costs.
Generally, we are talking about insurance , the most common being home insurance, life insurance and job loss insurance .
Ask for the terms and conditions of each of these products and know their conditions, such as costs, commissions or what they actually provide you.
6. Don’t limit yourself to a single offer
A mortgage is for many years, so you should not be seduced by the first offer you find or think that the only thing that exists is what your bank offers.
There are many offers waiting for you to sign up. You can also negotiate with the bank, but you should have different options for doing so.
Keep these tips in mind and you’ll find a mortgage that really suits your needs.
