Buying a house is one of the most important decisions a person can make. Many people dream of owning their own home and when it comes to choosing their mortgage, there are always doubts about what the right decision will be.
This is also true for people who want to invest in real estate.
But there is no concrete rule because the decision will depend on the situation of each person and what he or she considers to be best for him or her, taking into account the market. Even so, we tell you in this article what types of mortgages there are and what factors you should take into account to choose yours.
Types of mortgages
There are three types of mortgages and each of them has its pros and cons depending on your situation. Because what may be the best for you may not necessarily be the best for someone else.
A fixed mortgage is a mortgage loan where the interest rate is constant throughout the life of the loan. These loans are not affected by rising interest rates, but neither can they benefit from falling interest rates. This means that you will always pay the same interest rate throughout the life of the loan.
In this type of mortgage loan, the interest rate varies and can therefore go down as well as up.
As a general rule, what is done is an annual or half-yearly review and, if at the time of this review the interest rate has risen with respect to the previous one, you will pay more instalments until your next review.
If, on the other hand, it has gone down, you will pay less.
These mortgage loans usually offer a fixed interest rate for the first few years of the mortgage and then a variable interest rate. And here, as with everything else, it will depend on the market situation with regard to interest rates and your economic and employment situation.
Factors to take into account in your mortgage
Banks usually offer discounts on the interest rate in exchange for contracting products marketed by the entity.
In this way, the aim is to reduce the interest rate and pay less on the mortgage. Although at first sight it may seem to be a good offer, it is always necessary to analyse well whether each of these products is of interest to us.
These products associated with the mortgage loan are usually:
- – Having your salary paid directly into your account
- – Having a credit card
- – Taking out a home insurance policy
- – Taking out life insurance
- – Contributing to a pension plan
And depending on the entity, they may offer all of them or just a few.
There are expenses to take into account when buying and selling a property. Banks do not usually give more than 80% of the total amount of the house, which means that you will have to pay the remaining 20% out of your pocket.
In addition, the buyer pays the corresponding VAT in the case of a new property or the ITP in the case of a used property.
On the other hand, financial institutions usually have commissions that you pay when opening the mortgage and when cancelling it.
The arrangement fee is a percentage of the total amount of the loan and the cancellation fee is a percentage of the amortised amount in case you want to advance your mortgage or cancel it completely.
You also have to take into account other associated costs that, although most of them are paid by the bank, you have to pay for the appraisal of the property and the copy of the deed that you request.
Choosing a mortgage is not easy and you are always looking for the best conditions. That is why it is important to take into account factors such as the interest rates of the mortgage market and our work and economic situation.
At Mora Group we will advise you in a personalised way, not only in the choice of your home but also so that you can make the best decision and choose the mortgage that best suits you.
If you would like us to advise you without obligation, you can contact us here.