The process of choosing and buying a home is undoubtedly one of the most important financial decisions we must make in our lives. This decision also includes another capital choice for our finances, the mortgage that we are going to take out for the purchase of the home.
Mortgages have become one of the largest operations that affect the personal capital finances of families throughout their lives. It is not in vain that we are talking about a long-term financing product that has a direct impact on our economic resources through the systematic installments that are applied until the expiration of the agreed repayment term.
As we will develop throughout this article, there are many elements to take into account before calculating a mortgage. Elements such as interest rates and their application. The vast majority of mortgages on the market today are adjusted to variable rates; that is, they are referenced to a specific index. This means that these types of mortgages need revisions that readjust their cost every certain period of time, and therefore, the whore that the others pay. This concept of fixed or variable interest rate, as we will see later, is basic before contracting a mortgage. In the same way, we will find other very important and determining elements.
Basic things before contracting a mortgage
As with any other type of banking product, before contracting a mortgage, it is very important to know how it works and its conditions. This also happens due to issues that sometimes we do not take into account as much as the application of commissions, commissions that can become decisive in mortgages since they make the difference at a time when the benefits or defects of a mortgage are scarcely measured. in tenths
From the point of view of the application of interest, we tend to look for those that seem lower. And we say that they seem lower because low interest is not always accompanied by a large mortgage. A good example of this can be found in those mortgages that discount the contracting of products in parallel, deducting small percentages from the differential for each product contracted. This means that we can reduce the differential of our mortgage but at the cost of accumulating expenses of other products, which almost never compensates for the percentages saved.
In this sense, it is logical to pay attention to those added products that may or may not be interesting for our personal finances. The bank cannot force you to take out your own home insurance since this is not legal. However, it can force you to have home insurance and make the mortgage and its concession conditional on contracting it. This means that really, on many occasions, you will not be able to get rid of hiring, at least for a period of time, these insurances in order to obtain bonuses.
Something similar can happen when it is proposed to us to reduce the mortgage and contract more products. Generally, it will not be mandatory, but the difference between a discounted mortgage and one that is not will be substantial.
Another basic issue to pay attention to initially is the possible presence of abusive clauses or simply not suitable for the normal development of a mortgage—for example, the application of floor clauses or swaps.
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In the case of a mortgage to which floor clauses are proposed, it is very important to thoroughly review its conditions, check that it is not abusive and even negotiate a said clause with the financial institution. It is a dangerous clause as we already know and that has brought with it many problems and demands. In the case of Swaps , less frequent, we are dealing with a financial derivative that comes to cover possible increases in the interest rate, in this case they can be very harmful if the reference indices go down. Be careful, this derivative is not mandatory although they can offer it together with the mortgage contract, it is very important to be clear about what we are contracting and its dangers.
We must always remember that we are dealing with a long-term financing product , and that once the mortgage conditions are signed, it is very difficult to modify them. Therefore, it is not a decision that we should make without a good selection and advice process, even resorting to independent and professional advice if necessary.
What mortgage can you afford?
One of the most common mistakes when calculating a mortgage is that we think exclusively of the costs from the point of view of the value of the home and we do not take into account that we are going to have to assume more expenses and that these are going to influence very important in the repayment installments that the mortgage is going to have.
This translates into the fact that we must apply a realistic calculation of what the total of the operation is going to suppose, this calculation must not only add the value of the house applied to the mortgage and the expenses that it will suppose directly in commissions, formalization expenses, etc. but to realistically contemplate all the economic effort as a whole that the operation is going to entail.
This should always be done, even when we do not need to resort to complementary financing to reach the total amount of the purchase price of the home, but, obviously, in the latter case with much more reason. Currently, mortgages hardly cover more than 80% of the appraisal value or purchase price of the home, to this we must add the formalization costs, etc. Of course, defining how we are going to finance that missing money is a basic question. Keep in mind that if you must resort to a personal loan, this loan and the interest are added to the whole of the debt you acquire, and therefore must be taken within the operation as one more part of expenses.
Analyze the amortization fee
Of course this is another key element since the amortization fee is not a temporary expense or a short-term amortization . This must be framed within a long-term vision of expenses and income.
It is taken for granted that many people, faced with the psychological pressure prior to buying a home , tend to assume costs above what they should really assume. This has a lot to do with impulse buying optimism and an overestimation of our personal finances that is not always realistic. Of course, it is beyond any doubt that it is key to take into account our ability to face not only the repayment installments but also the possible increases in these when we have a variable-rate mortgage.
The tricks to calculate mortgage are not always worth it
There are many ways to interpret whether we are facing a good or bad mortgage for our pocket. One of the most common is to consider the amortization fee as a percentage of our expenses and income, within this system, the perfect idea is that we do not spend more than 30% of regular income on housing. Obviously it can be taken as a gross expense reference, but it cannot be an exact reference at all.
30% for an economy with a high level of spending and that just makes ends meet can be a lot, while for a more comfortable economy it can be little. The first of the cases should try to adjust to your economic reality, while for the second it may be much more interesting to amortize quickly than any other type of investment or destination for money.
Mortgage comparators and simulators
These are two different tools but they can be perfectly complementary and can also help us a lot in the first phase before contracting mortgages.
Comparators, which abound on the Internet, can be a great help when it comes to refining our search and reducing the number of mortgages that may be of interest to us. These are increasingly advanced tools that, thanks to the filters that have been incorporated, will allow us to reduce the number of mortgages that really interest us to an affordable number for study after a good search.
Once we have reduced the group of mortgages to the minimum suitable for study, we can use the simulators that the financial entities themselves usually provide on their Internet platforms. These simulators really offer good results, eye, good results as far as the mortgage is concerned without taking into account other variables that we have already considered above. Using the simulators we can get very close to the base mortgage that we are going to need.
Keep in mind that today we have no excuses not to make comparisons between mortgages and analyze them later . It is not interesting from any point of view to contract the first mortgage that enters our eyes or that is offered to us. This does not mean that in the end said mortgage is not the best, but it does require a comparison and in-depth study of the products that the market offers and that are closer to our economic reality. Remember, it is the longest financing product that you will upload in your life, so it is worth spending time in your study before hiring it.