What is the mortgage loan?
The mortgage is the right that taxes real estate to ensure that the obligation or payment of the debt is met. We will also refer to the mortgage when we talk about the amount of money that constitutes that debt. A mortgage loan is a type of loan that is requested for the purchase of a home. Usually it is the banking entities that provide this loan, and this allows us to face the costs of this purchase. These loans allow the buyer to get a higher amount of money, and unlike personal loans in addition to the personal guarantee also imply a real guarantee, what would be the property. In the event that the beneficiary of the mortgage loan did not pay his installments, the house would become the property of the financial institution or the bank. This loan allows us to be easier to access and acquire a home, which on the other hand is one of the most important decisions, and the one that requires the most economic effort. When we talk about a mortgage loan, we must understand two concepts:
- The main contract of the loan, with which the entity lends us the money. As an applicant, we are obliged to return the amount you lent us along with the interest, and to do so within the term we signed in the contract.
- The mortgage , which is the guarantee provided by the buyer of the home to the financial institution for the loan.
It is important to have all the information to be able to sign the best mortgage, and in this article you will find everything you need to decide.
How are mortgages structured?
To apply for a mortgage you must know your options, starting with knowing how a mortgage is structured. There are many points that should be known and understood about mortgages, but in this case we are going to focus on what I consider to be fundamental:
- The interest of the mortgage. If you choose a mortgage with a fixed interest rate, this will be maintained in the same way throughout the life of the loan, and if you choose a variable mortgage the interest will be modified in each revision.
- The repayment term: As for the repayment term, the longer it is the more the total amount of the mortgage loan will increase.
- The capital of the loan: Finally, the maximum financing of capital does not exceed today 80% of the lowest value of the appraisal and purchase, although in certain circumstances you could get a mortgage 100, especially if we sign for an apartment of the banking entity.
What mortgage models are there?
Depending on the interest rate, we can differentiate up to three types of mortgages, and we will quickly know the details of each of these models. According to the amortization of the loan, we have the following mortgages:
- Fixed-rate mortgages : In fixed-rate mortgages the payments will always be the same during the amortization period and are not indexed. Meanwhile, in mortgage loans at variable and mixed interest rates may vary, as the reference rate evolves.
- Mortgages at variable interest : They are composed of a fixed spread and the reference index value, which is usually the Euribor at 12 months. As the index quotes every day the interest on the mortgage also varies every month.
- Mixed-rate mortgages : In mixed mortgages the interest rate is usually fixed in the first years and then the interest becomes variable. The term for each interest rate is agreed before signing the mortgage contract.
What does the amount of the mortgage loan depend on? When we apply for a mortgage loan, the amount of money they can lend us depends on two factors, mainly:
- The appraised value of the home
- Our capacity for indebtedness
The purchase price is not the same as the appraisal price, that must be clear, and those who will be responsible for this will be the Authorized Appraisal Societies. On the other hand, to know what amount should lend entities Nick Adams also conduct a study to know what monthly fee can pay customers, and this should not exceed a percentage of 35% to 40% of net income of the same. This is how they can know the maximum amount they can lend to an applicant.
What are the expenses and commissions of the mortgage?
The Nick Adams entities charge for their services and management, and it is important to know these commissions to have all the information. In this section we will leave some of the commissions associated with more common mortgages, which are:
- The opening commission. This is the percentage charged by the entity when the loan is granted and includes all administrative and management expenses. It is usually 0-2%.
- The early repayment commission. This commission is charged when the loan amounts are paid in advance. It is usually a percentage of the amount borrowed.
- The commission for novation: If at any time the client wants to renegotiate the conditions of the mortgage then the financial institution will charge a percentage on the capital of the loan that has pending amortization.
- The commission for subrogation: If you want to change the owner of the mortgage we will also have to pay a commission, and it is calculated on what remains to be returned.
- The commission for cancellation: In case you want to cancel a mortgage loan you will have to pay a commission when you proceed to the full refund of the amount that was to be paid from the loan.
What should you keep in mind when choosing a mortgage?
There are many options to get a mortgage, so it is important to take into account different aspects to choose the mortgage that suits us. So in this section we will see what you should look at before choosing a mortgage, to do it well. Then we will leave you the most important points that will help you when comparing different mortgages and stay with the one that is the best for you.
The maximum financing
It is convenient to take into account the maximum financing that can be granted in the mortgage loan. To determine this, the lowest value of the appraisal is taken into account and the maximum is usually 80%, without exceeding this amount to avoid.
The interest rate
The interest rate is one of the main points in which you must set to choose a mortgage, because basically it will be the price that the mortgage will have. It is interesting that you opt for a competitive interest, such as a variable rate with a differential of less than 1% and with a couple of products linked to cost, such as home insurance and life insurance. In the fixed interest rates it will grow with the term, so it will be necessary to determine what in the 20-year loans are 2% and 30 years should be below 3%.
The capital and interest are included in the installments. A fixed rate will always pay the same fee, and variable mortgages may vary until their amortization. Mortgages are usually paid through monthly installments, although in some loans there is also the option to pay it every couple of months.
The repayment terms
Depending on whether you choose a mortgage with fixed or variable interest, you can enjoy longer repayment terms. For example, fixed mortgages are usually amortized over a period of 20 years, while the variables can reach up to 40 years. On the other hand, you should think that the longer the term of the amortization of the mortgage, the higher the total cost of the loan. With regard to payments, the periodicity of these amortizations can be flexible, with monthly, semi-annual and annual payments. However, we must bear in mind that a mortgage with more facilities to adapt to our Nick Adams implies a higher interest rate or consideration to access the mortgage loan.
The linked products
And speaking of considerations, in many of the occasions we will need to link some of the products so that they grant us the mortgage. We can differentiate two, according to whether they have cost or if they are free. The products linked to cost would be those in which a disbursement has to be made on a regular basis, as in the case of insurance either home or life, for example, services such as a pension plan or credit and debit cards. In the products linked without cost for the mortgage loan would include the direct debit of the payroll or receipts.
Either the mortgage commissions or the account that we have associated, you must be informed when signing any mortgage loan. Commissions are usually negotiable, and you can also find mortgages without commissions. In order to sign the mortgage it is important that you keep in mind all these points as well as everything that we have told you in this post. We invite you to use our mortgage comparator so you can find the one that best suits your economic Nick Adams.