From Serra Real Estate Group We know that applying for a mortgage is a complex and very important process when purchasing a property, and for this reason, in this article we give you the 4 basic guidelines that will help you know what you should know before applying for a mortgage.
Assess your financing capacity
Not everyone has the same financial capabilities, so it is important that you do not rush and that you carefully study all the possible options before making any decision. It is important that you look carefully to find the financing option that best suits your capabilities, since making a mistake in this point could lead to bigger problems.
However, it is also important to note that banks do not currently grant mortgages that exceed 80% of the value of the property; and generally with a maximum repayment period of 30 years. Even so, some entities can extend it up to 40 years. Depending on the age of the person requesting the loan, this period can be reduced to 15 years.
Learn about the types of mortgage loans
Study the type of credit that best suits your financial capacity and assess whether you are interested in applying for a fixed-rate loan, a variable-rate loan or a mixed-rate loan.
What is a fixed, variable or mixed credit?
- Fixed credit: The interest rate does not vary during the term of the mortgage and the payments remain stable throughout the period.
- Variable credit: Monthly payments remain stable after each mortgage interest review period.
- Mixed credit: They combine the two previous types.
What is the best option?
Choosing between different types of credit is complicated. There is no one option that is best for everyone, but it is best to make the decision based on each person's risk tolerance. If you always want to pay the same, a fixed mortgage may be more suitable, but if you want to pay little in the short term and you don't mind your instalment changing, a variable mortgage may be more profitable for you.
In any case, when evaluating which interest rate is best for us, we must also analyse the current status of the reference interest rate, such as the Euribor. If the fixed rate contracted is low, it may be much more interesting to choose this option than the variable rate, since in this way the payment will always be constant and low and will not be affected by increases in the Euribor that can occur throughout the years of the mortgage.
What does the majority prefer?
Currently, most people who buy a home in Spain prefer the stability of fixed mortgages. These are the data from March 2021 (the latest available) according to the National Institute of Statistics:
– 56.21% of those who took out a mortgage to buy a home opted for a fixed interest rate.
– 43.81% of those who signed a mortgage loan to purchase a home opted for a variable rate.
Familiarize yourself with the concepts of TIN and APR
Take into account other important aspects within the mortgage loan selection process such as the TIN and APR concepts.
Do you know what the concepts TIN and APR are?
The TIN (Nominal Interest Rate) is the fixed percentage agreed upon as a payment concept for the money lent. It indicates the percentage that the bank receives for lending the money. Meanwhile, the APR (Annual Percentage Rate) is the interest rate that indicates the cost or effective return of a product.
For example, if we have requested 100,000 euros in an operation with an APR of 1%, our loan will actually have a total amount of 101,000 euros, because that is what we have to repay to the bank that lent us the money.
Don't forget the associated commissions
And finally, keep in mind that each bank decides the fees it applies to the total amount of the mortgage (Opening fee, Fee for the account associated with the mortgage and Amortization fee).
Do you need financing?
From Serra Real Estate Group We also take care of this. Contact us via email info@serra.immo or by filling out the form contact form. Our experts will study your needs, your customer profile and your financial capacity to determine the entities where you can obtain the best financing conditions.
