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If you are thinking of buying a home and need to finance it through a mortgage loan, you should know that at this time, hiring a fixed mortgage or a subsidized variable (that is, with some other contracted product), costs almost the same: a 2.37% APR for the fixed versus 2.35% APR for the variable, according to the Consumer Association specialized in the protection of the financial user ASUFIN (@asufin_).
There is also another circumstance: mortgages fixed are those who have experienced a cheapening in the last year, compared to increased cost of variables, as reflected by the ASUFIN Mortgage Barometer. Specifically, it has gone from an average interest of 3.15% (according to the data collected in July 2020), to 2.88% last July for non-subsidized loans with invariable interest. On the other hand, subsidized fixed-rate mortgages (the client hires other products) have also fallen from 2.73% to 2.37%.
By contrast, interest-bearing mortgages variable now cost more than a year ago, according to the data handled by ASUFIN. At the moment, the average APR stands at 2.66%, compared to 2.64% a year ago, with regard to non-subsidized loans.
Practical example of the cost of the mortgage
If we transfer these percentages to a mortgage of 150,000 euros at 25 years, the result is that by the modality fixed, a monthly fee of 663,15 euros, while, if we choose the variable, we would pay 661.65 euros, which represents a difference of only 1.50 euros per month, or what is the same, 18 euros per year, as indicated by ASUFIN.
What is the reason for the interest of the banks to market fixed-rate mortgages? The reason is that, with the Euribor installed at historical lows and with no signs that things will change, as reported by the European Central Bank (ECB), banks are maneuvering to secure profit margin that provide them with the loan at a specified interest rate.
For this reason, there are even some case of fixed mortgage slightly cheaper. For example in BBVA and for a loan of 150,000 euros over 25 years, with a fixed mortgage, a fee of 672.93 euros would be paid, 1.51 euros less per month (18.12 euros less per year) than the 674.44 euros per month that is paid by the variable.
In the Santander, the difference is even higher in favor of the fixed mortgage, in which 653.45 euros are paid per month, 4.47 euros less per month (53.64 euros less per year), than the 657.92 euros that are paid for the variable, according to calculations made by ASUFIN.
Keys to choosing the right loan
Faced with the dilemma of having to choose between a fixed and variable rate mortgage, these are the factors to take into account:
– Market offers.
– Degree of competence.
– Access requirements for each product.
– Characteristics and destination of use of the property.
If the investment is to long term, as the case of the Habitual housing, it may be interesting “to opt for a mortgage to fixed rate, with which we currently ensure a low and constant interest rate, “argues ASUFIN, while, on the contrary, if we are buying for invest, that is, a home that we will sell in the short or medium term, “it is recommended variable rate, given that the Euribor ensures a competitive price with no signs of a rise in the short term “.
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