Mortgages: learn to choose the best option
The concept of a mortgage is directly related to one of the greatest expenses an individual or family can suffer: buying or buying a home. In the last decade under the terrible effects of the usual economic crisis, mortgages have become a real headache, meet payments, for many consumers, was and is a true utopia.
In addition, if we add the controversial subject of the ground clauses, we create a very cumbersome scenario that requires certain knowledge to be able to get off on the right foot of the liquidation of a mortgage.
There is a great offer of mortgages, each of them with its particular characteristics and conditions, which makes it difficult to be sure of selecting the best possible option according to the personal needs of the consumer.
In this article we want to deepen on the subject of mortgages and highlight their main characteristics. In this way we wish to facilitate and clarify the doubts that may arise in this topic.
First, you should start with the most basic, in most cases, consumers tend to misuse two concepts: mortgage and mortgage loan. This is a big mistake, although they are two terms associated with the same context, their meaning and use is very different, although the term “mortgage” prevails for both concepts.
Mortgage and Mortgage Loan: Differences
Mortgages and mortgage loans are not the same, although in “street language” they point to the same process.
The mortgage is a real right of guarantee on real estate, once formally registered in the Land Registry it has legal effects “erga omnes”, that is, it is linked to an obligation which is guaranteed and only its correct cancellation allows to get rid of the same.
On the other hand, the mortgage loan concept defines the obligation guaranteed by the mortgage. It is a loan of money made by a bank, some interest and term of maturity is assumed, the guarantee of its return is the mortgage on said properties.
As can be seen, the two terms are related to each other but their function and meaning vary substantially.
Once we have seen in detail the difference of both concepts, from now on we will take the word “mortgage” to refer to the banking product used to purchase a house.
First point to keep in mind: personal situation
Long before starting the rigorous path of selecting a mortgage, you have to reflect on the personal and financial situation. The banking entities demand certain economic conditions to start negotiating a mortgage.
Among the different requirements that a bank usually “requires” the most incontestable and non-negotiable are the following:
Net monthly income. Verifying a stable source of income is a priority. These revenues must be sufficient to take over the payment of the mortgages without problems. In more technical terms it is called the “repayment capacity” and this should not exceed 30% or 40% of the income. Thus, a person who charges $ 1,500 per month, the minimum fee would be $ 450 and the maximum of $ 600.
Zero indebtedness Having a faultless credit history and zero debt is essential to show a healthy economic situation and provide the bank confidence in the ability to pay the mortgage.
Savings. To formalize a mortgage they must have savings of at least 35% of the value of the home, which 20% the bank does not finance and the rest for the relevant initial mortgage expenses.
Do you meet all these requirements? Well, it’s time to know what concepts and small print you have to take into account to choose the best mortgage that suits your interests.
What makes one mortgage better than another?
We are facing the key question that many consumers ask themselves in this type of situations. The answer is not simple, because what makes a mortgage offer more attractive than another is subject to certain concepts and conditions: interest rate, commissions, maturity dates and links.
Classification of mortgages by interest rate
Among the concepts and conditions listed in the previous point, the interest rate is a determining factor both to classify the mortgages and the final amount of the installments.
But what are the interest rates? It is the interest that is applied to the monthly installments of the mortgage. At present there are three types of interest that in turn define the classification of mortgages: fixed, variable and mixed.