2023-08-29 00:06:40
If, despite current interest rates and inflation, you are thinking of taking out a mortgage to buy a home, you will surely be more inclined towards a fixed mortgage than a variable one. But, first of all, we recommend that you analyze the mortgage market, study the possible evolution of short-term interest rates and know your rights as a user of this banking product.
In this post we give you some clues to find the best fixed mortgagesby the experts of SinComisiones.
How is the mortgage market?
According to data from the General Council of Notaries, in March 2023(latest data published), were signed 33,935 mortgages before a notary. The vast majority of these mortgages were used to purchase housing.
The Community of Madrid and Catalonia each made almost 6,000 mortgages, with an average amount of 294,713 euros in Madrid and 191,303 in Catalonia.
If we compare this data of 33,935 mortgages with that of March 2022, in which 45,157 signatures were processedwe see how in a year, this activity has fallen by 24.8%.
The main reason for this mortgage downturn is the high interest rates and with no prospect of lowering in the short term, the high cost of living and the perception that users have of the economic situation.
Therefore, getting a mortgage now is an important decision that must be taken calmly and prudently.
types of mortgages
Regarding the type of mortgage, fixed, variable or mixed, according to data from the INE, from March 2023, the distribution of mortgages based on their interest rate was 63.9% fixed vs. 36.1% variable mortgages.
It is curious how in January 2021, these two percentages were practically at par (50/50%) but since then, they have gradually distanced themselves in favor of the fixed rate.
This has a lot to do with the evolution of interest rates in the Euro Zone, flat until practically well into 2022, and with periodic increases by the European Central Bank up to the current 4.25% in August 2023.
This obviously affects mortgage loans referenced to an index such as the Euribor, which follows the evolution of the price of money.
Tips before choosing a fixed mortgage
If you opt for a mortgage at a fixed interest rate, the most natural thing to do, keep the following tips in mind:
loan amount
Banks will only give you a limited amount of money. The one that they believe does not jeopardize the possibility of repaying the loan according to your income and financial situation.
For this reason, take into account the percentage of the appraised value of your home that the bank will lend you. Normally, they will grant you a loan for up to 80% of the market value of your habitual residence.
This % will decrease to 70% in the case of a second residence or rental home. This is so because the bank estimates that we will take better care of a habitual residence than of another that will pass through other hands.
Compare nominal interest
The most important aspect when choosing a fixed interest mortgage loan is precisely the interest that the bank proposes.
Analyze the linkages
Be careful because a loan with a lower nominal interest can be more interesting if we meet any additional requirements or sign a product with the bank when contracting the mortgage.
The result of entering the nominal interest together with any commission for opening or studying the loan plus the linked products will give us an APR.
Comparing the final APRs that you will pay from various banks is the best way to find the best offer in terms of cost, since, unlike the nominal rate, the APR includes any other concept that you must pay.
Examples of links that the largest banks in Spain are offering today to subsidize the nominal rate of the loan are:
Direct debit of income (and maintenance of these) with certain minimum amounts that will depend on the entity. Hiring a loan amortization insurance. Hiring risk life insurance with the bank. Hiring home insurance with the bank. Use of cards per year for a given minimum amount or for a minimum number of periodic operations. Subscription of shares in investment funds offered by the entity for a given average annual balance.
Duration
The duration of a loan is important. If you are in your thirties, you are in luck since you can contract up to a maximum of 30 years with the main financial institutions (in the second home it will be less).
Signing a fixed mortgage with this duration will help you obtain a lower monthly payment for the life of the loan.
In general, when you provide your payroll or income statement to your bank for the study of your loan, they calculate your ability to continue paying until your retirement age. Keep that in mind.
However, there are exceptions such as Cajamar, which allow you to extend your mortgage until you are 80 years old.
Commissions for early cancellation
If you have some financial capacity to repay the loan before its maturity, this aspect is interesting.
The law says that the commission for early repayment (total or partial) cannot be greater than the demonstrable financial loss that the lender may suffer due to the early cancellation of the debt.
Do not forget to compare the commissions for partial or total cancellation that the bank will charge you on the amortized amount of your fixed mortgage.
For example, BBVA charges you an early repayment commission of 2% during the first 10 years of the life of the mortgage, which is reduced to 1.5% thereafter.
Pre-contractual information
Once you are clear about all of the above, ask your bank for the Pre-contractual Information Sheet (FIPRE).
It is a generic informative document that banks are obliged to provide to consumers when we ask them for initial information on the full conditions of the loan.
This file is designed to allow us to compare “churras with churras” when we have before us the different loan offers from the banks.
The FIPRE is the first informative document that a user receives when he approaches one or several banks to inquire about their offer of mortgage loans. It replaces the old “information brochure” that provided for regulations on transparency in the conditions of these loans, already in 1994.
The next document, more formal and tailored, since they are going to ask us for a lot of asset and solvency information, is the personalized information sheet (FIPER), which is not linked to the bank either.
And finally the binding offer, with the exact data of the loan to be notarized if we go ahead with a specific fixed mortgage.
Related regulations
It is regulations related to mortgage loans:
Law 5/2019, of March 15, regulating real estate credit contracts (talks about fixed mortgages). Order EHA/2899/2011, of October 28, on transparency and protection of banking services customers (talks about fixed mortgages).
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