What types of mortgages are there and which one is best for you?

May 28, 2021

One of the most confusing aspects of buying a property we know is the mortgage. It is completely normal not to know what kind of mortgages exist and which one is the best for your case.

From Inmobiliaria Espígul, as a real estate and construction company with more than 30 years of experience in the sector of reference in the province of Girona, we want to inform you of some tips so that you can choose the best mortgage and the purchase of your home turns out to be a success.

What is a mortgage?

A mortgage is a contract that is signed to obtain bank financing when buying a property.

The guarantee of these loans is the property itself, which remains in the hands of the debtor while he pays the debt. Therefore, if the debtor is unable to pay the debt, the bank will have the right to request the property.

What types of mortgages are there today?

The first thing you need to know is what possibilities there are in order to decide what best suits your needs:

Fixed mortgage: The instalments are stable and are not affected by the rise or fall of the Euribor, which is the main reference index for mortgages. In other words, you will pay the same amount throughout the mortgage period.

Variable mortgage: In this type of mortgage, the instalment rate varies according to the interest rate that corresponds to the Euribor. If the Euribor falls, the repayments will also fall, but if it rises, the repayments will be higher.

Mixed mortgage: when the interest rate remains fixed for the first years of the loan and then it becomes a variable rate where the instalments can vary according to the evolution of the Euribor.

There is no one mortgage better than the other, you simply have to assess your situation to choose one type of mortgage or another.

What aspects are taken into account when signing a mortgage?

Mortgages are made up of three main elements:

> The capital: This is the amount of money that the bank lends to the buyer to purchase the house. Depending on each entity, the limit that banks finance is between 80% and 100% of the appraised value of the property.

> Mortgage loan interest: This is the percentage that the debtor has to pay to the bank for the capital that is borrowed. As we have commented above, this interest can be fixed or variable.

> The instalments: This is the time established for the return of the money and the interest lent. In the case of mortgages, these are usually long periods, since the amount of the loan is also high.

How to know which type of mortgage to choose?

When choosing a mortgage it is advisable to study well the offers of several entities before signing, because with such a long amortization period, any small difference can turn out to be a big amount over time.

Find the mortgage that suits you

Finally, before taking out a mortgage, you have to be honest with yourself and know if you have the necessary liquidity before embarking on the process of buying a property, if you will be able to achieve a variable interest rate, etc. This step obviously has nothing directly to do with whether or not you will be able to take out a mortgage, but it will help you to know what type of mortgage best suits your needs and lifestyle.

At Inmobiliaria Espígul we like to accompany you throughout the whole process of buying your property, from the first doubts to the closing of your mortgage. Do not hesitate to contact us at hola@espigul.com or you can call us on 972 220 110.

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