After a long period in which the mortgage market remained closed, financial institutions have totally changed the scenario with a flood of offers in all modalities, to unprecedented levels, at competitive interest rates.
They are aimed at solvent clients with the economic potential to acquire a good number of financial products to which the banks link their concession. The new generation of mortgages does not stop adjusting its conditions to compete in a battlefield mined by the collapse of the interest rates.
The new environment is very favorable for those who want to buy a home. The photo of the new loans shows that at a fixed rate it is already possible to mortgage TAE interest rates (see table) between 2.8% and 3.7%, that at a variable rate there are half a dozen offers with a lower spread To 1% with respect to Euribor and that a new family of mixed mortgages with fixed interest rates has been born and in some cases have already fallen below the level of 3% APR.
If not for all pockets, there are mortgages for all tastes. What are the keys to success? What does the fine print say? To what extent are the binding requirements less attractive to the best offers?
A variable type. There is not one mortgage modality better than the other, but loans that fit or not to a certain profile. With the negative Euribor (month-on-month closed at -0.010%) variable-rate mortgages are a very attractive option, especially for those who do not need to mortgage themselves in excessively long terms, over 10 or 15 years.
The reason is that they can benefit from a long period of very low interest rates. Now, the spreads on the euribor of the best offers are between 0.90% and 0.99%, with terms that reach 30 years with the only exception of ING Direct, which reaches 40 years.
As a general rule, variable rate mortgages are better adjusted to those who have an expectation of growth and security of monthly income and who have a sufficient savings mattress that in the medium term would allow them to face a potential rise in the Euribor without a substantial reduction Of their standard of living.
A fixed type. They are the big bet of the financial sector to get returns in the mortgage business because their expectation is that rates will remain low for several years. For home buyers, it is a historic opportunity to borrow at competitive rates without having to worry about potential future Euribor rises.
The opening committee is key when it comes to making a decision. In the best offers ranges from 0% of BBVA or Abaca to 1%.
Mixed bookstores. The banks are revitalizing a modality that combines a fixed initial interest rate with a term that normally is 10 years (can reach 20 in some offers like the one of Banister) with a later variable type referenced to euribor that oscillates between the 0.90% and 1.49%. The greatest risk in this type of product is a possible strong monthly letter rise when the variable rate is activated.
In addition to the opening fee, attention should be paid to interest rate risk commissions, which, as in fixed rate mortgages, apply if the customer cancels the loan before maturity. In some cases, the penalty may reach 5%.
Getting the best interest rates on the mortgage has a cost. Entities have launched the hunt and capture of the most solvent clients in the country. Today financial institutions impose important barriers to entry. The first has to do with the amount financed. In all modalities, the best offers on the market do not exceed 80% of the appraisal value for first housing, a percentage that is significantly reduced (to levels between 60% and 70%) in the case of the second home. But, of course, there are exceptions when the financial institutions themselves sell their own real estate. In these cases, it is usual to reach 100%.
Minimum incomes and linkage also make the difference between those who can access a credit or not. As a rule, the best mortgage proposals require monthly income between 2,000 and 3,500 dollars. The domiciliation of the payroll, the contracting of life insurance and savings and the use of cards of the entity are the most common obligations faced by those who are hiring a mortgage. But getting a ‘top’ type can force you to go further. Some entities also require contributions to pension plans that can reach 2,000 dollars per year and purchases of investment fund shares.