What a mortgage is and how it works? | Mortgage Loans
The mortgage is a type of financial product by which a bank makes us a loan that has the guarantee of a property and is usually contracted for the purchase of a home.
It is also known as a mortgage loan and in this post we help you better understand all the details that make it up and how a mortgage works.
The three basic aspects of a mortgage
- The term It is the time we set according to the bank to return the borrowed money. It depends on many factors, such as your working conditions, your age (the older you are the less years they will give you), the money you have requested, the monthly fee you want to pay …
- The interest. It is the commission we must pay to the bank for lending us the money. The percentage applied also depends on many factors: if it is fixed or variable, the Euribor, other products that you have contracted with your bank
- The amount It is the money they lend you. Currently, mortgage loans cannot exceed 80% of the appraised value of your home. That is, if your house is worth 100,000 euros, the bank will grant you a loan for a maximum of 80,000.
Analyze well all the factors that make up your mortgage before deciding on one entity or another.
Interest rates on a mortgage
When we sign a mortgage loan we can do it basically with three different interest rates.
- Fixed. In this case a percentage is established from the beginning and this is maintained until the mortgage expires, regardless of the fluctuations of the Euribor. This interest rate has the advantage that you will always know what you pay; The disadvantage that the interest rate is usually higher than the other options.
- Variable. An interest rate is applied as a result of adding a differential to the Euribor, the European indicator that sets the price of money in these cases. Imagine that your bank sets an interest rate for its variable mortgages of 1% and that the Euribor of the year is 0.20%. You would pay 1.20% interest. The advantage of this type of mortgage is that you usually access lower spreads at the beginning and that if you find yourself at a time like the current one and the Euribor is negative, the interest you pay will be very low. The drawback, which is generally reviewed annually and that a rise in the Euribor can cause our quota to vary greatly.
- Mixed. In this case we pay a part at fixed interest and another variable.
The risks of mortgages
In recent times, various judgments have been declaring null, for abusive, different commissions that were charged in a mortgage contract, such as the floor or ceiling clause.
Be very careful when signing your mortgage, analyze very well the derivative expenses that are charged to you and negotiate each point to avoid overpaying without need. If despite all these tips you still have doubts, consult an entity like Gandalf before signing.