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If you are considering buying a home and need to finance it with a mortgage, be aware that currently taking out a fixed or subsidized variable mortgage (i.e. with another contracted product) costs almost the same: an APR of 2.37% for the fixed against 2.35% for the variable, according to the Consumers Association specializing in the protection of the financial user ASUFIN (@asufin_).
There is also another circumstance: Fixed mortgages are those that have experienced a decline in price over the past year, relative to the higher cost of variables, as evidenced by the ASUFIN Mortgage Barometer. Concretely, it went from an average interest rate of 3.15% (according to data collected in July 2020), to 2.88% last July for non-subsidized loans at fixed interest. In contrast, subsidized fixed rate mortgages (the customer takes out other products) also fell from 2.73% to 2.37%.
Source : ASUFIN
In contrast, variable-interest mortgage loans now cost more than a year, according to data processed by ASUFIN. Currently, the average APR stands at 2.66%, compared to 2.64% a year ago, for non-subsidized loans.
Practical example of the cost of the mortgage
If we postpone these percentages on a mortgage of 150,000 euros at 25 years, it follows that by the fixed modality, a monthly flat rate of 663.15 euros, whereas, if we choose the variable, we would pay 661.65 euros , which is a difference of only 1.50 euros per month, or what amounts to the same, 18 euros per year, as indicated by ASUFIN.
What is the interest of banks in marketing fixed rate mortgage loans? The reason is that, with the Euribor installed at historically low levels and with no sign that things will change, as the European Central Bank (ECB) has reported, banks are maneuvering to secure a profit margin that provides them the loan at a specified interest rate. .
For this reason, there are even cases of slightly cheaper fixed mortgages. For example at BBVA and for a loan of 150,000 euros over 25 years, with a fixed mortgage, fees of 672.93 euros would be paid, i.e. 1.51 euros less per month (18.12 euros less per year ) than the 674.44 euros per month which are paid by the variable.
In 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 which are paid for the variable, according to calculations made by ASUFIN.
The keys to a successful choice of credit
When faced with the dilemma of having to choose between a fixed and variable rate mortgage, here are the factors to take into account:
– Market offers.
– Degree of competence.
– Access conditions for each product.
– Characteristics and destination of use of the property.
If the investment is long-term, as in the case of Habitual Housing, it may be interesting “to opt for a mortgage at a fixed rate, with which we currently ensure a low and constant interest rate” , argues ASUFIN, whereas, on the contrary, if we buy to invest, that is to say a house that we will sell in the short or medium term, “the variable rate, since the Euribor ensures a price competitive with no sign of a short-term rise “.
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