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Now that the Spanish economy is going through a delicate moment, asking for a mortgage loan to finance the purchase of a home is more risky. However, if we know all the expenses that we will have to face, that risk will be somewhat lower, since we will be able to assess whether we will be able to face them or not. In this article we will explain how to calculate a mortgage to find out if we would be able to pay all the costs related to this operation.
Calculate if you can pay the down payment on the mortgage
The first thing we must to know is if we have enough savings for the bank to approve our request. For this, we must bear in mind that, in general, entities finance up to 80% of the purchase value. In addition, additionally, we will need our own funds to pay the expenses associated with the sale: taxes, registration fees and notarial, etc.
As it is, we will have to calculate if our savings add up to 32% of the home’s value: 20% to pay the part that the bank will not finance us and 12% to pay the costs of formalizing the purchase. If we don’t have that money, our chances of getting a mortgage will plummet.
For example, if the home you want to buy costs about 200,000 euros, you will need to have savings of about 64,000 euros (32%).
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Simulate the loan fee and apply the 35% rule
The next step is calculate how much the monthly payments would cost us of the mortgage to see if we could pay them. For this, we can use the following free odds simulator:
The recommended thing, in these cases, is that the amount of the fees of the loan, added to our other debts monthly financials, do not exceed 35% of our income net monthly. And given that our economic situation could worsen due to the coronavirus crisis, the ideal is that we place ourselves as below that percentage as possible.
In that sense, you have to know that the lower the capital of the mortgage and its interest, the cheaper the installments will be. We can also reduce them if we choose a longer term, although the longer we take to return the money, the more we will pay in interest in the long run.
For example, if you charge a net salary of about 2,500 euros among all the holders, the fees and your other debts should cost you less than 700 euros per month.
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Last expense to calculate the mortgage: the cost of the extra products
Finally, we must bear in mind that, Along with the mortgage loan, you generally have to hire other products: insurance, cards, accounts … All of them can have a periodic cost, which can make us pay hundreds of euros annually if we put them all together.
Therefore, we will also have to do numbers to find out how much all these additional products will cost us throughout the year. And once we have that amount controlled, we must assess whether we can pay it without problems. To know these expenses in advance we can ask the bank to give us a breakdown, although they also appear in the documentation that the entity will deliver to us when requesting the mortgage.
There are entities like Mortgages.com that they will only ask you to take out the mandatory damage insurance, which you can subscribe with any insurer. With them, you can save hundreds of euros in extra services, which can pay off even if they apply a somewhat higher interest.
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