Guide on mortgages: fixed or variable, amortize or not, subrogate to save … | My money

The mortgages they are a whole world. The task is not easy when choosing. The bank’s offer is plentiful and it is necessary to decide whether it is better to opt for a fixed or variable rate. In addition, at a time when financial institutions compete for customers and offer the lowest rates in history, change banks (surrogacy) may be an opportunity to save. Likewise, if you want pay off the loan doubts often arise as to whether it compensates or not. They are eternal dilemmas that do not always have a clear answer, since most of the time it depends on the personal and economic situation of the consumer. However, there are some keys that help.

Fixed or variable interest, which is better ?: Today, both fixed and variable mortgages have very low interest rates, 2.81% and 2.05% on average according to the latest statistics. That is why choosing is more difficult than years ago, when the fixed ones were clearly more expensive. “Depending on the needs and risk tolerance, one or the other will be more interesting”, they point out in HelpMyCash.

Variable interest fluctuates depending on the evolution of the index Euribor. This indicator has been negative for years and at historical lows close to -0.5%, so that right now this option is cheaper compared to the fixed one. However, the stable rate gives peace of mind, since the letter to be paid will never vary and scares are avoided.

“The trend is the most relevant element to take into account when faced with a possible loan,” says Emiliano Bermúdez, deputy director general of donpiso. “Currently, the Euribor is negative and that may lead to think that it will last for a while. However, the medium-term trend is that the interest rate will eventually grow. For that reason, the variable interest is going to be less recommendable than the fixed rate ”, he believes. That is to say, even if right now contracting a variable mortgage is the most economical option for the client, “according to Bermúdez the situation will be reversed. It should be noted, however, that it has been warned for years that the Euribor is going to rise and it has not yet done so. has done.

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“On paper, there is no better option than another for everyone. You want to always pay the same, a fixed mortgage may be more appropriate. If you want to pay little in the short term and it does not matter if the quota changes, a variable mortgage can pay more to account “, they emphasize in HelpMyCash.

Although fixed mortgages have been gaining ground and came to surpass the variables in percentage of contracting, currently variables are once again the preferred option. According to June data from the INE, 61.2% of those who took out a mortgage to buy a home opted for a variable interest rate.

Subrogate to lower the mortgage price: In recent months mortgages have skyrocketed with changes in their conditions. Many financial institutions are launching aggressive offers to ‘steal’ customers from other banks. Subrogations, or bank changes, rose more than 200% last June.

Silvia Escámez, co-founder of Finteca and Prohipotecas, affirms that “since the beginning of the pandemic the number of subrogations has increased considerably since more and more people want to take advantage of the current interest rates offered by banks.”

In the boom years, during the housing boom, many consumers took out mortgages with excessively high interest rates. In order to save, many of these users have decided to opt for creditor subrogation over the last year. Despite the fact that changing the financial institution involves several expenses, such as the payment for the offer (around 200 euros), the appraisal of the property (usually around 300 euros) and, in some cases, a commission for subrogation (less than 2% ), it must be taken into account that the interest rate can be negotiated downwards, obtaining notable long-term savings. In addition, some entities bear the costs.

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“Since the entry into force of the Real Estate Credit Law, a little over two years ago, the financial institution assumes most of the expenses, so this process is not very expensive. In addition, it is very simple. You just need to find an entity that can improve the loan, accept this offer and leave everything notarized, “concludes Escámez.

To amortize or not, that is the question: It is possible to alleviate the mortgage debt by repaying the loan in advance. On the one hand, it must be borne in mind that now that the official ECB interest rates are at historic lows, hardly any interest will be saved with amortization. In this way, it is only profitable for those who bought the home before 2013, since there is a tax advantage thanks to the deduction for the acquisition of a habitual residence.

The Treasury returns 15% of the amount contributed in the year up to a limit of 9,040 euros. Thus, it is possible to obtain up to 1,356 euros of tax benefit, or double if a married couple holding the mortgage files the declaration individually instead of jointly.

On the other hand, amortizing allows either to reduce the amount of the monthly bill or to shorten the life of the credit – at the consumer’s choice. From the Hipoo mortgage marketplace they explain: “if it is the case that you have a comfortable financial situation, it is normal that you prefer to reduce the term of the mortgage, since you will end up paying less interest as it is generated for less time, allowing you to save more in the long run. However, if you come to the end of the month a bit more rush, it makes more sense to reduce the installment to pay in order to alleviate the monthly payments. “

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In any case, they warn that “it is always that preferably to carry out the amortization process during the first years of the mortgage”, since it is in that time interval when they face the highest interests.

Likewise, the commission for early repayment or withdrawal must be taken into account. This commission is derived from the total or partial cancellation or amortization of the loan before the agreed term. Depending on whether the mortgage is of a fixed or variable rate, canceling it in a period shorter than that established in the contract entails the payment of a commission, with maximums set by law. This expense is considered a kind of penalty for returning the money in advance, since it implies a change in the mortgage contract.

According to the latest mortgage report from the Trioteca Study Center, the average age of the mortgage applicant is 39.84 years. 70.77% are salaried. They are followed by 10.20% of people whose occupation is self-employed, 8.76% have positions of State officials and 6.01% have other occupations. Finally, 2.89% of the applicants are pensioners and only 1.37% are entrepreneurs.

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