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What do you need to know before applying for a mortgage? 5 most common doubts

Date: June 27, 2022 7:55 pm

Buying a home is one of the most important and responsible decisions in life. Debt entered into with the bank at the time of requesting a mortgage loan, which lasts (a priori) about 30 years, makes it so, no doubt. However, when making a purchase decision and which mortgage to choose among all the offers, there are a number of very common doubts that iAhorro solves.

1. How much do I need to save?

Without a doubt, this is the main problem that many people face, especially the youngest. Precarious jobs and low wages make access to home ownership even more difficult than one might imagine. But how much is needed?

Considering that entities they usually provide about 80% of the financing of the cost of a house, it’s common that people think it’s enough to have the remaining 20%, but no. You really need 30% of the total: 20% for a deposit and 10% for mortgage-related expenses (VAT or tax on documented legal actions and transfer tax, notary, registry, appraisal, agency).

Definitely, for the house 150,000 euros, the buyer needs 30,000 euros for entry and another 15,000 for taxes and expenses. In other words, you must have a total of €45,000 in savings before applying for a mortgage. If the cost of a house is 300,000 euros (average for major cities like Madrid or Barcelona), you will need twice as much, 90,000 euros: 60,000 for entry and another 30,000 for additional expenses.

2. Can the bank finance me 100%?

After learning what it takes to buy a house and realizing that you don’t have that kind of money, the most common question is: can you buy a house without savings? Or, what is the same, can the bank finances me for 100% of the value of the house as well as additional costs? The answer to the first question is no, but to the second it depends.

In order for the bank to provide us with 100% financing for the value of the house, and also take care of the expenses, whether it be a new building or a second-hand house, we would need to have a very solvent economic profile (very high income and a stable job), no delinquent debts (not listed in any delinquent files such as ASNEF) or having guarantee(s).

3. Can I be a homeowner but not a mortgage debtor?

The owner of the house is the person who officially appears in the contract of sale, as well as in its public deed, signed in front of a notary and in the Property Registry. This person will be a priori obliged to repay the mortgage loan. With two owners (both listed on the deed) and one of them is exempt from mortgage payment, this will need to be formally reported to the bank and the Treasury as it is possible that this is seen as a donation from who pays the other person.

However, there is also the figure of a pledgee who is not a debtor. This refers to the person who appears on the document only to give his consent to its execution, and will only be used if the mortgage debtor stops paying scheduled payments, for which he will also act as a guarantor.

4. Can I be my own sponsor?

The first thing to keep in mind is what the guarantor does, it responds to the non-payment of the debt by the owner with all his property, present and future. Consequently, the owner in this case, as an individual, could not be his own guarantor.

However, a person who is about to buy a house and owns another, always free of charge (whose mortgage is paid off and is not collateralized by any other loan), can provide this house as collateral for a second one. And in this case, she would answer the debt with the value of the property what guarantees payment. Of course, in order for the bank to recognize the apartment as collateral, it must evaluate it in order to know how much of the debt is covered by it.

5. What is better to conclude: fixed or variable mortgage?

This is one of the main questions when it comes time to buy a house. Most banks work with two types of mortgages: fixed mortgages or variable mortgages, although there are still organizations that have mixed mortgages in their catalog (fixed part and variable part).

A fixed mortgage is one with which the user always pays the same monthly payment for the duration of the requested loan. However, with a variable mortgage, the user does not know what he will pay in the medium or long-term monthly payment, since the interest rate on which the bank loan depends fluctuates depending on the values ​​set by the benchmark index each month. (Euribor).

According to data compiled in January by the iSavings Index And with Euribor hitting historic lows in December 2021, now might seem like the right time to ask for a variable mortgage. However, the trend shown by this indicator is unlikely to last. It is also for this reason that the percentage of Spaniards who now sign a variable mortgage is much lower (8.62%) than those who opt for a fixed mortgage (86.21%), as shown in the Mortgage Comparison Report.


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