One of the most common doubts that clients ask without sufficient mortgage training, when they are looking for a mortgage loan to buy a house, is if the mortgage offered is cheap . Very related to this doubt, is to want to know if the mortgage loan that has been contracted is good, competitive, if it has been successful with the bank.
The first thing to know is that there is no single cheap mortgage loan, since there are entities that offer financing with the same conditions. On the other hand, perhaps the mortgage granted to us is the most competitive given our economic profile and guarantees, despite the fact that better loans are commercialized in the market.
We have contracted the best mortgage
Therefore, answering the question of whether we have contracted the best mortgage will always be complicated. In addition to the fact that not all banks offer mortgage conditions accessible to the general public, there is the possibility of obtaining advantages if we know and can negotiate; also according to the office of the same bank that we visit we can get different mortgage conditions. And finally, our employment situation, our level of savings, the guarantors that we can contribute and other personal and economic conditions determine the mortgages of the market that we can access.
Therefore, just as when we make the IRPF statement we cannot look at what they return to the neighbor to know what we will pay, nor is the neighbor’s mortgage necessarily comparable to ours.
How to know if we have contracted a good mortgage
If we are clear that each family and mortgage is a world, we will understand that what we will explain below is a generalization that may not be applicable to all cases. However, there are characteristics of the mortgage loan to analyze to assess the operation.
Different purposes, different conditions
First of all, the mortgage offer must be differentiated according to the purpose: purchase-sale of a first home, a second residence, a subrogation or change of bank, or a good debt reunification. Each purpose is financed under very different conditions, the best ones being the bank change and the purchase of the usual home.
Using mortgage comparators will help us get an idea of the offer for each purpose, although given the opacity of the mortgage offer and the commercial interests of many of these comparators, there is nothing left but to go to mortgage experts ( request information from the brokers Good Finance employees) or negotiate personally with the banks.
A cheap mortgage will not have commissions of opening, of study or of withdrawal (partial or total cancellation). Many times we look at the initial fee without first analyzing important features such as commissions, which make the fee more expensive for 30 or 40 years; for a few euros that represent the month, at the end of the year there are thousands.
It is also important that you do not carry additional insurance , mandatory pension plans or any other financial product that does not interest us. There are mortgage loan deeds that contemplate interest rate bonus clauses based on the contracted products or linkage maintained with the bank. Many times the cost overrun of the insurance or the low profitability of the product that rewards us makes it more profitable not to hire it, despite not enjoying the agreed bonus. Insurance is usually cheaper if they are contracted with a specialized insurer than through the bank’s insurer. Therefore, unless insurance and products force us to hire, cheaper will end up being the mortgage, in principle. The only mandatory insurance by law is fire (home), and does not imply that we have to contract with the bank’s insurer, either.
Beware of swaps (which are not interest rate insurance, although they have been placed with this sales argument in many offices), which are expensive and not recommended if we do not fully understand the operation of financial swaps.
Clauses and various provisions in writing
Vital is that it does not have clauses that worsen the financial operation. For example, the land clauses, which limit the minimum interest rate that the bank will apply to us. It is useless to have a good variable interest rate if we limit the decline.
Additional guarantees are another cost to consider. Perhaps a mortgage with a higher interest rate is preferable to a financially cheaper one if it does not force us to provide guarantors or to mortgage another real estate. Unless mandatory guarantees, better contracted mortgage, ceteris paribus .
Type of interest
The type of benchmark is very important to know if the signed mortgage is economical, as is the differential that is added. In mortgages at a variable rate, the interest rate is calculated by adding a differential to the benchmark. A Financial Standing + 1 cannot be compared directly with an IRPH of entities + 1, for example. We must study how both indices evolve over time to be able to draw conclusions.
The initial installment of a variable rate loan does not matter, since it is calculated with a fixed rate that is only valid for the first year or 6 months. Let’s not be fooled by this initial monthly figure, to compare. The important thing is to analyze different scenarios of variable interest rate, with the possible evolution of the reference rate. And it is highly recommended to take a Financial Standing (we recommend avoiding the IRPH of all entities because it is more expensive and legally conflicting) at its maximum historical, apply it to the mortgage we are studying and calculate this fee. If with our income we are not going to be able to meet this maximum installment, maybe it is better not to mortgage or find a cheaper house.
The operation as a whole must be analyzed in order to answer the question of whether the mortgage offers a low APR interest rate or not. Let us always read carefully the binding offer and the draft of the deed, a few days before the signature before a notary, and we will save many future problems.