More and more houses are sold in Spain . The economic improvement of many families and the fall in the prices of the sector has led to a significant increase in the demand for real estate . If you are thinking of asking for a mortgage with which to buy the house of your dreams, in this article we are going to put you homework.
Before going to the bank to ask for a mortgage you must make sure that you are clear about where you are getting. To get it you have to ask yourself the following questions.
Have you asked yourself these questions before asking for a mortgage?
What amount can I afford to pay?
We would all like to have a villa with pool and gardens on a plot of 500 square meters. Money is the only thing that separates us from that dream. Therefore, the first question you have to ask yourself before asking for a mortgage is: what amount can I afford to pay without shocks and without risking the future sustainability of my personal finances?
A lot of attention here because to answer this question some people only pay attention to the monthly payment they have to pay . As a consequence, they make the mistake of extending the repayment of the debt until 30 or 40 years so that the monthly receipt is “affordable”.
The problem is that the longer the period of repayment of the mortgage, the greater will be the interest to be paid. It can happen, for example, that you end up paying 200,000 euros for a house that only cost 100,000.
Our advice is that at most you mortgage at 20 years and that the monthly amount to be paid does not exceed a quarter of the household’s monthly income . Bear in mind also that the Euribor is in negative at this time and that in the medium term will end up rising and making the quota more expensive. We see it in the next point.
What kind of interest is better?
Currently you can contract your mortgage with three types of interest: fixed (the same throughout the life of the mortgage), variable (depending on the Euribor) or mixed (fixed interest only for a few years and variable later). Is there any better than another? It depends.
If you want to be sure of knowing how much you will pay for your mortgage every month for the next 20 years without worrying about how the market will evolve, the best option is the fixed rate . The “but” of this interest rate is that it is higher than the current variable rate.
If on the other hand you plan to amortize a lot of mortgage during the first years of the same, without a doubt the variable rate is the most suitable for you. In this case, remember that the forecast is for the Euribor to rise in the coming years. When this happens, your mortgage fee will also rise.
What are the additional costs?
It is essential to calculate well what will be the additional costs to the purchase of our home , which can be classified into three types:
- Amount not financed by the bank . Most banks only finance 80% of the appraised value of a home. This means that you will have to save to advance the remaining 20%. Also keep in mind that the appraisals are usually made downwards, so it can happen that the house costs 120,000 euros and the bank values it at only 100,000. In this case you will need to have a saving of 40,000 euros.
- Mortgage expenses . There are a number of expenses related to the mortgage that you will have to face. For example, notary and registry. If you buy a second-hand home (and therefore have to pay the Tax Documented Legal Acts), these expenses will range between 10 and 12% of the amount of the mortgage.
- Value Added Tax . As a good taxpayer, do not forget the VAT. If you buy a new home, you must add 10% to the purchase price. In the case of a protected home, VAT is only 4%.
The sum of these additional costs will also influence when determining if the house you want to buy is viable or not.