When ordering a mortgage bank can give us some leeway to choose the term, but what is cheaper? And safer? How do you know which is the best period in our case?
In 2015, the maximum period that banks often offer to hire a mortgage is 30 years. But that does not mean that everyone agrees will extend your payment three decades. The best time for us depend on factors such as our income and savings capacity, among others. if the bank gives us options, we have to consider these points before choosing.
Do not accept a share of over 35% of our revenues
The first thing that will mark what must be our deadline is our payroll, as the Bank of Spain advised not to accept fees that may involve more than one third of our income. Thus, in the case of a mortgage of 200,000 dollars to Euribor + 1%, but could be paid in 20 years in installments of 926 dollars, if the holders have an income of 2,000 dollars per month is convenient pay in 30 years at odds of 650 dollars for them remaining 1,350 dollars a month (not just 1,074 dollars) for the rest of family and household expenses.
Keep in mind that the Euribor may rise
Continuing the above example, currently a mortgage of 200,000 dollars to 30 years pay a fee of 650 dollars per month. But that’s because the Euribor is trading at a record low of 0.08%. What if in the coming years the index to rise to 3%? We would pay 955 dollars a month, which we would be very fair in the month. That’s why, if we are farsighted, not we will take a mortgage of 200,000 dollars having income of 2,000 dollars. We could ask, for example, 150,000 to 30 years with a fee of 716 dollars.
Remember that to ‘cut’ there’s always time
It is true that the fewer years let’s paying us, less interest the bank charged us. For example, if we asked for 100,000 dollars to Euribor + 1%, if we return in 30 years pay 117,118 dollars to the bank, while if we can return it in 20 years only pay 111,233 dollars. But it is also true that, if we are not very high and stable income, it is best ” to ensure the shot”, i.e., mortgage hire 25 or 30 years whose share are sure we can afford. So, if we can later pay more per month, it is always possible to make prepayments, ie make refunds for example, $10,000 blow over will not pay interest.
However, remember that this operation leaves us to account, it is best to have negotiated a redemption advance 0%. You have to think about negotiating this commission before signing the loan because if not, by default, banks typically charge between 0.25% and 0.50% of the redemption amount. Note that in the market already exist mortgages as mortgage Santander to Euribor + 1.25% , the Mortgage Mari Carmen de Abaca to Euribor + 1.25% , the ING Orange Mortgage Euribor + 0.99% which allow amortization early at any time without charging any fee for it.
In the end, it will be necessary to find a balance between paying in the shortest possible time (not to rise interest) and leave us some ease in the month, as well as some cushion for contingencies. The shorter terms are restricted as to the highest and stable income. For other families and stakeholders, best mortgages to sign 25 or 30 years to allow free prepayments. Recall that if we hire a mortgage to 20 years and then need to last until 25, nothing assures us that the bank will accept the deal. It is best to sign a big term that we can always trim.