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After spending several months looking for a house, you finally find the home of your dreams. Now is the time to make the purchase and find a mortgage to pay it off. For this you must understand how these loans work and the different types that are available, as well as the procedures involved in the home purchase operation and other aspects that you cannot ignore, such as the need to take out home insurance.
Here they go three keys to take into account to choose the mortgage that best suits you. It is important that you find the most appropriate option for your pocket and lifestyle so that paying for your future home does not become a headache, and you can assume the mortgage payments without having to make a great effort.
Key 1. How do mortgages work and how to choose the most suitable one?
Once you have chosen your future home, the bank will analyze your economic situation (net income, other outstanding loans, type of employment contract, etc.), as well as the situation of the property you are going to buy.
In this way, it will offer you the financing alternative that best suits your situation and the home you are going to acquire. It is usual for the bank to ask you for some documentation (ID, payroll, last income tax return …) to present you a offer with all the characteristics and economic conditions.
These are some concepts that you should understand and to which you should pay attention to know which option is the best:
- The Annual Equivalent Rate (APR): The APR is used to compare different loans, with different interest rates, commissions, expenses, terms and form of amortization.
- The maximum amount of the loan and its duration. The mortgage usually covers up to 80% of the appraised value of the home and the term to pay it ranges between 10 and 35 years.
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The conditions that, if they are met, they will allow the interest rate to be reduced or discounted, that is, what you will have to do for the loan to be subsidized.
- The monthly installments that will result. The duration of the loan determines the amount of the installments. The longer the term of the mortgage, the lower the installments will be.
Interest rates, fixed or variable?
Another of the most frequent doubts is whether the mortgage is better to have a fixed or variable rate. The choice depends mainly on the ability to pay and the duration of the loan.
- Fixed rate mortgages they have the same interest throughout the life of the loan without any surprises due to the changes that the market may undergo. This option is interesting to avoid uncertainties in the payment of the mortgage, especially in the long term.
- Variable rate mortgages They are those that have an interest rate that varies periodically (every six months or every year) from the beginning of the loan. The variable rate causes the amount to be revised downward or upward, every six months or every year.
Other questions you should know when applying for a loan are:
What financing can I request?
Normally they can finance you up to 80% of the appraised value of the home.
What expenses will a mortgage entail?
The signing of a mortgage entails associated expenses: management, registration, appraisal, Tax of Documented Legal Acts and notary’s office. The distribution of expenses is regulated by law, it is done as follows:
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In charge of borrower (customer): appraisal.
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In charge of lender (entity): Registry, agency, AJD (Documented Legal Acts) and notary.
Key 2. Will I know do all the paperwork to buy my house?
The process of formalizing a mortgage to buy a house involves some procedures that will be simple:
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The notary where the purchase and mortgage will be signed and in advance of the day of signature, will explain the conditions of the loan and will clarify any doubts that exist.
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The signature of the deeds before a notary, both for the sale of the home, and the constitution of the mortgage so that you can sign everything in the same act.
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The bank facilitates the payment of the house as agreed and also, with the collaboration of trusted managers, They will take care of registering the change of ownership and of the mortgage in the registry, in addition to the payment of the taxes that the transaction entails.
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The entity takes charge of all expenses derived from the mortgage loan (except for appraisal expenses), while the expenses arising from the sale of the home will be borne by the client.
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In addition, your bank will continue to accompany you in everything you need related to your new home such as change of direct debits of basic bills or home insurance.
Key 3. Should I insure my home?
Once we become the owners of our dream home, in addition to the mandatory damage insurance, the hiring home insurance, which will cover the damages that may arise in the home, thus preventing it from being devalued.
You can take out basic damage insurance, but it is worth considering the possibility of extending it to cover robberies, domestic accidents, and even the damages that we can cause to the neighbors. The policy will reflect the existence of the mortgage loan.
And if you have not yet found the home of your dreams, at Ibercaja we accompany you at this time to make this process easy for you. Some dreams are easier to fulfill than it seems. You can see other tips and things to consider before buying a new home and looking for the mortgage that best suits you.
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