How to get a good mortgage
When it comes to buying a home, few are the lucky ones who can do it in cash, and most of the time we will need a loan. To be more specific, we will have to request a mortgage loan that will also accompany us for decades. Therefore, it is very important to do a good job of selecting to find the best mortgage.
Here are some tips:
1. Having something saved is key to obtaining good conditions.
In the process of buying a home you have to keep in mind that you will have to face some notary fees and taxes. These expenses can be around 10% of the value of the home you are buying, and will be added to the amount you will need to buy the home. On the other hand, most of the entities offer by default mortgages for 80% of the value of the house. In fact, they usually choose the minimum value between the appraisal and the purchase value. For example, if you want to buy a property for € 110,000 and it turns out that the appraisal gives it a value of € 100,000, the bank will offer you a € 80,000 mortgage (80% of € 100,000, in this case the appraisal was lower of the purchase price).
For the negotiation with the bank and the conditions to go in your favor, ideally you should have saved 30% of the value of the home you want to buy (10% constitution, notaries, taxes, and 20% to pay the apartment and leave only 80 % of its value pending coverage).
2. Fixed, variable or mixed interest?
In general, it is best not to play at guessing the future because, as the Nobel Prize winner in Physics Niels Bohr said, "making predictions is very difficult, especially when it comes to the future."
The only modality that does not depend on the future is the fixed rate mortgage, the others will be indexed to something. The most common will be the Euribor, right now the Euribor has a very low interest rate (so much, that it is negative), but a little over 6 years ago it reached more than 5%, and this can happen again because it was not something exceptional. Therefore, the interests of a variable rate mortgage can vary a lot.
The one you have to run away from is the mixed interest rate. It is a new modality in which the bank combines the worst of fixed rate mortgages and the worst of variable rate mortgages in a single mortgage. Its offer is usually that the first years you are offered a fixed rate ("for your peace of mind") and in the future it will go to variable.
This works totally against you. The Euribor is low now, and is expected to rise in a few years. So the opposite suits you. Variable mortgage now to take advantage of the low Euribor, and a fixed interest rate mortgage in the future to avoid surprises with the Euribor.
3. Be careful, the interest rate is not what you have to look at.
The mortgage is something that will accompany us for many years. You have to look at the fine print and don't just get carried away by the interest rate they offer you. You have to ask them for the T.A.E.
In most cases, to offer you the best conditions, the bank "invites" you to contract with them the home insurance, the life insurance, have the payroll with them, hire them a pension plan, etc ... For each of The products you hire will be offered a discount on the interest rate (for example, if you take out life insurance, they give you a reduction of 0.25%).
These products have an added cost and insurance is usually more expensive when contracted with the bank. The T.A.E. is the interest rate resulting from adding the costs of contracting products to the bank to the base interest rate of the mortgage.
To compare mortgages, always use the T.A.E., since each bank will ask you for different conditions to contract the mortgage. The T.A.E. it is the only way to compare pears to pears. Never compare mortgages based on the interest rate offered.
4. Find balance.
The longer the term of your mortgage, the lower the monthly payment. But you should also keep in mind that the longer the term, the greater the amount of interest you will have disbursed. As an example, if you take out a € 200,000 30-year mortgage at 2% interest, you will end up paying € 65,500 in interest.
If, on the other hand, you do it for 10 years, the interests are reduced to € 20,600. We must find a term that allows us to comfortably face the monthly bill, but always trying to keep the term as low as possible.
In mortgages it is very important to search and compare as much as you can. You can save a lot of money!
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