The concept of what a mortgage is is known by almost everyone, as it is quite common. A mortgage loan is the most widely used resource to finance a home.
However, despite its popularity, there are many aspects of mortgages that are confused or unknown. Here we are going to try to clarify all of them, so that you know in detail the specific characteristics of mortgages and, in the process, take advantage of some tips to know how to use them as best as possible.
Main characteristics of a mortgage
A mortgage consists of a financial agreement with which a person can acquire a property, thanks to obtaining a loan from a bank or another financial entity.
Here it is important to differentiate between two concepts: mortgage loan and mortgage credit. The first is a loan whose payment is guaranteed by the value of a property. That is, it is a banking product that allows the client to receive a certain amount of money to be able to buy a home (which would be the loan capital) from a banking entity in exchange for the commitment to return said amount, together with the corresponding interest, through periodic payments.
In contrast, a mortgage credit is an amount of money that the banking entity lends to the client, who can use it totally or partially, during a specific period of time, being obliged to return the capital and the interest generated while the credit lasts, calculated on the sum actually used.
What mortgage expenses can be claimed?
In the event that you formalized your mortgage credit before June 16, 2019, there are certain expenses that you can claim, based on the new Mortgage Law.
The expenses included in this claim are the following:
- Notary fees: You can claim 50%.
- Registry fees: You can claim all expenses related to the registration of the mortgage deed.
- Appraisal fees: You can claim 100%.
Which is better: fixed or variable mortgage?
The big question! Fixed mortgage and variable mortgage are the two best-known modalities when requesting this loan.
In practice, each has its advantages and disadvantages. They differ in these matters:
- Variable interest mortgage: Its monthly installments vary according to the reference index (usually the Euribor). It allows knowing if this typology is more or less economical in the short term, but not in the long term. It usually has a longer repayment period and lower installments.
- Fixed interest mortgage: Its monthly installments do not vary and the price remains fixed throughout the amortization. It allows knowing the amount to be paid at all times, which provides stability. It usually has a shorter term and somewhat higher installments.
Actually, there are more types of mortgages. These are other modalities:
- Mixed mortgage
- Reverse mortgage
- Mortgage for groups
- Mortgage for young people
- Mortgage for non-residents
- Bridge mortgage
- Mortgage for a second home
- Flexible mortgage
What is a mortgage subrogation?
There are different operations related to mortgages. We tell you here what a mortgage subrogation is, a frequent doubt among many users.
Mortgage subrogation consists of changing a mortgage from one financial entity to another, generally with the objective of modifying the financial conditions of the mortgage loan.
Requirements for applying for a mortgage
When it comes to applying for a mortgage, specific documentation must be presented. To make this task easier for you, we offer a downloadable checklist with which you can review what documents you need to apply for a mortgage, download it for FREE!
Frequently asked questions about mortgages
How can I compare different mortgage offers?
When choosing the best mortgage for you, it is important that you compare all available ones. Use these keys:
- When comparing fixed mortgages, look at the NIR and the APR, and ensure you are comparing identical time periods. It is important to check if there is a cancellation fee (total or partial) and/or subrogation fee.
- To compare variable mortgages, you must value the reference index as the most important element. If the index is the same, look at the spread that the lender applies and the commissions. The ideal variable for comparison is the APR, which includes all associated expenses.
- In both cases, value the commissions for services such as opening, amortization, withdrawal, etc.
- Finally, consider whether taking out linked products could improve your mortgage terms. This is very important, since they are not included in the APR calculation, and in many cases being required to take out a specific insurance policy with the lender (life, home, etc.) in order to maintain the initial financial terms may not be the most cost-effective option if you could take out those policies (life insurance is not mandatory) with other providers instead, even if that means slightly worsening the initial terms. You need to assess the transaction as a whole.
What impact does the interest rate have on my monthly mortgage payment?
In the case of variable mortgages, the interest rate depends on the evolution of the Euribor. These mortgages are reviewed periodically (usually every 6 or 12 months) and, depending on the index value on the reference date, the corresponding decrease or increase will be applied during the next period.