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Buying a house is, without doubt, one of the most important steps you will take in your life, and as such, you need to consider and weigh up all the different factors that affect the acquisition of your property. One of the most important is deciding on which mortgage you are going to take out. How can you tell which conditions are right for you?
In today’s blog, we have 5 tips that you should bear in mind before you commit to a mortgage. Take note!
As your starting point, it is essential to be clear about your situation and what your needs are, and on this basis you can draw up a list of the pros and cons of each offer, taking into account matters such as: the repayment conditions you are being offered, what your borrowing capacity is, deferment options, or the guaranties you are required to provide, before going ahead. Take your time and if you have any doubts, get professional advice.
Even though making small monthly repayments might seem initially attractive, it is best to pay off the mortgage as quickly as possible, while always staying within your financial capabilities. As well as saving yourself having to pay accumulated interest, you will also have more ‘room to manoeuvre’, allowing you to reduce your repayments where necessary and extend your repayment period accordingly.
You should also bear in mind some of the advantages offered by banks at the start of your mortgage repayments, such as the possibility of deferring payments. Are these really beneficial to you or would they be of more interest at some future time?
In order to ensure you can meet your repayment duties more comfortably, as well as overcoming any possible economic setbacks, both during the term of your mortgage and afterwards, it is advisable not to borrow more than 80% of the total cost of the property, and that your monthly repayments should not exceed 50% of your income, otherwise the financial commitment might be too onerous for you.
A variable-rate mortgage tracks the fluctuations in interest rates, and you will have to absorb any increases in the said rates, while a fixed-interest mortgage will remain at a steady rate, and these are more advisable for people who do not have a large income.
Meanwhile, it should be pointed out that if you have a fixed-interest mortgage, these normally have a maximum duration of 15 to 20 years, during which period you must have paid it off in full.
Despite the fact that the conditions of your mortgage are imposed by the bank, if you spot any clause that you have doubts about or that you are unclear about how it may affect you in the future, negotiate it at the time so that any necessary changes can be made. It is essential that everything is recorded in the contract!
If you are thinking about buying a house in 2018, make sure you are up to date! Read our post on the trends that will define the housing market because some significant changes are on the way, such as the new conditions of the Mortgage Law which will come into effect during the first quarter of the year.