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 contract for the acquisition of the home.
Mortgages have become one of the largest transactions that affect the personal finances of families throughout their lives. Not in vain we are talking about a long-term financing product that has a direct impact on our economic resources through the systematic quotas that it applies until the expiration of the agreed amortization period.
How we will develop throughout this article there are many elements to take into account before calculating mortgage. Elements such as interest rates and their application. The great majority of mortgages in the market today are adjusted to the variable rate, that is, they are referenced to a specific index. This makes that this type of mortgages need revisions that readjust every certain period of time its cost, and therefore, the bitch that the others pay. This concept of fixed or variable interest rate, as we will see later, is basic before hiring a mortgage. In the same way we will find other very important and determining elements.
As with any other type of banking product, before hiring a mortgage it is very important to know its operation and conditions. This also happens for issues that we sometimes do not take into account as the application of commissions, commissions that can become determinants in mortgages since they make a difference at a time when the benefits or defects of a mortgage are measured sparingly in tenths
From the point of view of the application of interests we have the tendency to look for those that seem lower. And we say that they seem lower because not always a low interest is accompanied by a large mortgage. A good example of this we can have in those mortgages that reward the contracting of products in parallel, discounting the differential small percentages for each product contracted. This means that we can reduce the spread of our mortgage but at the expense of accumulating expenses for other products, which almost never compensates the percentages saved.
In this sense it is logical to pay attention to those added products that might be interesting or not for our personal finances. The bank can not force you to take out your own home insurance because this is not legal, however, if it can force you to have a home insurance and condition the mortgage and its concession to your hiring. This means that really many times you will not be able to get rid of the hiring, at least for a period of time, these insurance to get bonuses.
Something similar can happen when we propose to reduce the mortgage and hire more products. Generally it will not be mandatory but the difference between a bonus mortgage and another that is not going to be substantial.
Other basic issues to which to pay initial attention 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 soil clauses are proposed, it is very important to thoroughly review the conditions of the clause, to verify that it is not abusive and even to negotiate with the financial entity such a clause. It is a dangerous clause as we already know and that has brought many problems and demands. In the case of Swaps, which are less frequent, we are dealing with a financial derivative that comes to cover the possible increases in the interest rate, in this case they can be very harmful if the reference indices fall. Eye, this derivative is not compulsory contracting although they can offer it together with the mortgage contract, it is very important to be clear about what we are hiring 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 process of choice and advice, even going to independent and professional advice if necessary.
One of the most common errors when calculating mortgage is that we think exclusively of the costs from the point of view of the value of the house and we do not take into account that we are going to have to assume more expenses and that these will influence in a very important in the repayment installments that the mortgage will have.
This means that we must apply a realistic calculation of what is going to assume the total of the operation, this calculation should not only add the value of the house applied to the mortgage and the expenses that will directly involve commissions, formalization expenses, etc., but realistically contemplate all the economic effort as a whole that the operation will entail.
This should always be done, even when we do not need to resort to supplementary financing to reach the total amount of the purchase price of the home, but, obviously, in the latter case with much greater reason. Currently, mortgages hardly cover more than 80% of the value of appraisal or purchase sale of housing, to this we must add the costs of formalization and so on. Of course, defining how we are going to finance this missing money is a basic issue. Keep in mind that if you have to resort to a personal loan, this loan and the interest are added to the total debt that you acquire, and therefore they must be taken within the operation as a part of expenses.
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Of course this is another key element since the amortization fee is not a passenger expense nor 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 over what they really should assume. This has a lot to do with the optimism of the buyer impulse and an overestimation of our personal finances 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 of these when we are facing a variable rate mortgage.
There are many ways to interpret if 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 expenditure reference, but it can not be an exact reference at all.
A 30% for an economy with a high level of spending and that comes just at the end of the month can be a lot, while for a more comfortable economy it can be little. The first case 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.
These are two different tools but they can be perfectly complementary and can also help us a lot in the first phase before hiring mortgages.
Comparators, which abound on the Internet, can be a great help in 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 they have incorporated, will allow us, after a good search, to reduce the amount of mortgages that really interest us to an affordable number for their study.
Once we have reduced the group of mortgages to the minimum suitable for their study, we can use the simulators that the financial entities themselves usually provide in their platforms on the Internet. This 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 contemplated previously. Using the simulators we can get very close to the base mortgage that we will 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 comes through our eyes or that is offered to us. This does not mean that in the end such a mortgage is not the best, but that it is necessary to compare and study the products that the market offers and closer to our economic reality. Remember, it’s the longest financing product you’re going to raise in your life so it’s worth losing time in your study before hiring it.