When purchasing a home, most people turn to a mortgage. This type of loan is characterized as a guarantee of payment, undertakes to purchase the same property. It is what is called “mortgage” housing.

Sometimes you can also mortgage a home and free of charge to obtain financing at lower rates or amounts greater than the personal or consumer loans.

In Spain, almost all mortgage loans, 98%, are recruited at variable interest (see article on EURIBOR). Interest is calculated every six months or a year by reference to EURIBOR for that period and a small amount added (Example, EURIBOR +0.5).
Variable interest mortgage loans in stable economies

In contexts of low interest rates and low inflation, often not even consider the make fixed rate mortgages, since they usually have a much higher interest rate as variables. Therefore, in economies that are involved and expect stable medium to long term, which is the duration of the mortgages, we always opt for variable interest mortgage loans.
When inflation rises

But what happens when the economy suffers a more confusing time? When prices (inflation) rise over the account, the central banks increase interest rates to curb consumption and (the money is more expensive, then the credits are reduced, as well as the investors do not move your money if the simple deposits and offer an acceptable interest). This affects the variable rate mortgages also are affected by these increases when they get the time of his semiannual or annual review.

We watched the news and know many people who have seen their mortgage payments have risen to several hundred dollars, as appropriate, in recent years.

The question then, for someone who wants a mortgage is: I opted for the fixed rate and eliminate the uncertainties?
Advantages and disadvantages of fixed rate mortgages

The stability of the payments is the main advantage is supposed to fixed rate mortgages. There will be affected by rate increases, although this is a double edged sword, because when interest rates fall again, neither will benefit from this fall and we’re paying a price above the market.

Moreover, the interest rate differential between the floating-rate mortgages (averaging 4% APR for 25-year amortization) and fixed rate (average of 6% for 25 years) gives us a margin so that despite increases types, we continue to pay less than a fixed rate loan.

In any case, if the economy is stable, as in Europe, will the maxim that what goes up, down. And as long-term credits as there are now, even reaching the 40 year amortization, the payment is smaller and less noticeable increases.
Mixed rate mortgages

Another product offered by mortgage entities is the mixed type. It is often set a fixed term (eg 5 years at the beginning or end) and the remainder at a variable rate. This would be a good product if one borrows in a context of uncertainty and continuing rise in interest rates. We’ll be quiet for 5 years, hoping the situation will be resolved.
Conclusion as to which type of mortgage we are more interested

In short, fixed interest are more expensive and usually have a lower maturity, which requires more solvent throughout the duration of the loan. In return, we will affect the rise in interest rates, which can become overwhelmed in certain times of the rise of our dues.

In any case, variable rates are desirable because they are cheaper and allow greater maturity, so that quotas will be lower and more affordable, and to changes, we can always think long term that we find moments of all types: of ascent and descent.

Many individuals or families who already have a foreclosed home, have a need to change their residence. It may be, for example, because they need a bigger house when the family expands. Or because they need to move for work reasons. Or switch to a better home.

But as we all know, a house not be bought or sold in the overnight. When selling, do not rush, and we must try to get the highest price possible. And the house which we move will often be new and acquired work on the developer level, and therefore is not finished (and sometimes not start). Although we can also buy a used house.
How have the money to buy a new home without having sold the current home?

Most financial and credit institutions offer their customers products called Construction Financing, Bridge Loan, Mortgage Exchange Home and other similar names. The operation of these products is generally similar, with the peculiarities that may have each entity.

Basically, it lends money to cover the cost of re-purchase (or reserve entry, transfer, notary and registration for signature, etc..) Mortgage in exchange for the two properties. How many times have not yet signed the new purchase, the loan is generally personal to become, at the time of signing a mortgage.

The bank will give a maximum period for us to sell the current property since it gives us credit (may be 24 months, 36 …). During this period we will pay only interest or extending reduced rates to sell the old property.

Another method is that the bank gives you a new mortgage (mortgage also provided that the old property) and in the transition period until the sale of previous housing only pay the new mortgage. Once sold, this second mortgage increases your interest or fees to compensate for the loss suffered by the entity for not paying the old mortgage during the transition time.

Each entity, as mentioned, has its peculiarities in this type of product (about finance up to 100% of new housing, some not, some offer longer terms, other children etc.), So it will suit us particularly collect offers from several banks and savings and compare and negotiate properly to get the lowest possible cost or the best conditions.

In this sense, we must ensure that the transition period is long enough to achieve the intended purpose, namely that we will not burdened by the need to sell. Moreover, we should not be taxed by the commission done to shorten the transition period if we sign the new deed earlier than expected.
Advantages of bridging loans

In short, this type of product offers several benefits for people who want to move house. First, allow selling without haste, and therefore do not undersell. And in turn, allows you to purchase a house without selling the previous one, so we do not lose opportunities to buy the house you want and save us from future price increases (the seller is not expected to sell to give money ).
Disadvantages of bridging loans

But it can also have drawbacks, because having to mortgage the two properties, incur double expenses for notarial, registration, taxes, etc.. Moreover, we do good numbers, to ensure that future financial situation with the new credit will be manageable.

In any case it seems the perfect product for home without seeing change prompted by the rush to sell and buy.

Until recent years, credit institutions were often not given quantities beyond 80% of the appraised value of housing that he wanted to buy. But the rising price of housing has been more and more people need more of that 80%.

Moreover, household savings has declined, so that few people will have in their coffers with the remaining 20%. To which will be added expenses and taxes.

Although by definition have a mortgage as collateral the property acquired with it, banks do not want to stay in the homes of those unable to pay if they can avoid. Your profit is in charge interest as long as possible. By law, mortgages of up to 80% of appraised value will not be affected by other security than the same property.
When asked for a loan worth more than 80% of the appraised value of housing

But the circumstances previously mentioned, many people are forced to order more than 80% of the appraised value to meet the payment of housing and the costs associated with their purchase as well as furniture, appliances, etc..

In these cases, institutions ask for a guarantor to respond with their property (collateral) if the owner has not replied to credit payments. This is supposed to involve family or friends in an embarrassing situation for both. Also someone buying a second home may be required to attest that the first new acquisition.

But there are people who have no previous possessions and have no relatives or trusted people in the country that serve as guarantors, even in situations of economic solvency. This makes a lot of people could not access the purchase of a home and what banks also lost important business niche.
Unsecured mortgages over 80% of the appraised value to acquire housing

Thus, organizations can give no guarantee mortgages even if more than 80% of the appraised value of the house to buy. In fact, tend to arrive even at 120% of that value.

In return, organizations require the customer to take out insurance to cover the unpaid dues. Thus, monthly payments will consist of three added: principal, interest and insurance. This may adversely affect our future solvency level, because in exchange for not presenting guarantors will face a significant increase of quotas for the amount of insurance. Therefore the repayment terms are broad, up to 40 years, which makes payments more affordable and offset by rising insurance costs. And also this extension in time makes the operation profitable for the institution.

But there is often no guarantee mortgages as specific products widespread in all entities. Rather, individual cases are studied and their characteristics. Because even with insurance and property as collateral, banks grant loans only if they believe that his client maintains a certain level of solvency.

For example, as a rule, do not grant mortgages whose rates exceed 30% resulting from customer’s monthly income. And taking into account other loans that may be paying (car, cards, etc.).. Furthermore, it may impose certain conditions, including that the client has official or permanent contract in a medium or large, etc. If the conditions itself to mortgages tend to be stricter in the case of mortgages are usually unsecured him even more.

In any case, the usual practice of banks is to apply (rather require) a guarantor for transactions over 80% of the appraised value, rather than establish a mortgage without a guarantor but assured.

Sooner or later, the homeowners we have to do a series of reforms in it. Deterioration and aging housing or simple desire for modernization, the list of items to improve during the life of our housing is broad: from installing a heating system, to renovate the kitchen or the bathrooms, replace the tile floor, expanding distribution redo rooms, plaster and repaint the walls, etc..

But these reforms involve a high amount of money that few families have to deal with cash payments. Are being used then to apply for a bank loan.

Since reforms are a potential home finance market, lenders have striven to introduce some credits with similar names (Credit Reform, Reform Loan, Home Loan Reform, etc.). In order to provide the funding we need to implement reforms.

These credits are interlocked within the spectrum of personal consumer loans and are usually very similar in maximum amounts, repayment period and interest, although some institutions offer credit for the reform slightly cheaper than regular personal loans.
The quantities to obtain credit for a reform

The quantities to obtain credit for a reform can vary between 300 and 60,000 €, with repayment terms between 3 and 10 years depending on the amounts requested. And those interests are around 6 or 7% APR, but with two considerations: first, that the interest is lower the more loyalty to the entity exists (payroll, insurance, bills, mortgage, etc..), And secondly, we take into account that many of these loans do not have a fixed interest rate throughout its duration, but there are some that have a lower interest rate initially to increase from the second or third year, and others have a fixed rate within the principle and variable later. Therefore, we will study carefully the conditions and compare them with other loans. We always recommend the first to compare healthy habit of carefully and then decide. Moreover, as in the case of other claims, we must take into account when deciding that there are fees that can be expensive product, such as origination fee and / or cancellation insurance in case of death amortization and other expenses as the Notary (0.3% of loan amount) if the loan exceeds a certain amount, and notarial registration required.
Get money for home improvement mortgage amount

Also of note is that some institutions have the potential to obtain money from the mortgage amount that has already been amortized. This provision of capital tends to have a lower interest rate than personal loans, in exchange for the mortgage is based. Although a personal loan may seem, is but the extension of the mortgage. It is one of the cheapest options to reform the house, but we must have the sufficient capital in order to have repaid him.
Credit Express

If the amount of reform is not excessive, we can finance them through other credits such as credit express. As an advantage, we get the money faster, but as a major disadvantage, the costs are much higher (interest between 10 and 25%).
Credit Card

We can also use our conventional credit card, whose interests are around 12-15% annually and the availability of capital is immediate. But in the case of something urgent reforms, namely that there is a need for reform of the overnight, or express these credit card loans are a very attractive pay reforms. We may lose a few days to compare, negotiate, request and obtain a loan for more appropriate reforms for our needs and our pocket.

We have explained that a number of tools and calculators that help us to know how much we pay for our mortgages knowing certain information, such as the initial amount granted, the time for repayment and the interest rate.

Let’s see now a number of cases in which calculators can help us. To perform the calculations we use the calculators can be found online on the page of any bank.
Use mortgage calculators to compare mortgages

Before deciding on a mortgage, we should compare well with all possible options. With the tool for calculating monthly payments, we know which mortgage is most favorable to our interests. However, we must not forget to take into account opening fee for if varies greatly from one institution to another may be the choice of the lower fee is not always correct.
Use mortgage calculators to switch our mortgage lender

Once we have checked with the calculators that shares of the new entity are more beneficial, we calculate the amount we save on the total loan period, and subtracting the amount of commission of subrogation of the mortgage. If this commission still paying the balance is positive, it would be good idea to change our mortgage bank, or negotiate better terms with the current client to remain.
Use mortgage calculators to calculate the partial repayment savings

When we advance a number of what remains to pay our mortgage, we can easily reduce the time maintaining the same rates or reduce the monthly holding period. The calculators will tell us how much shortening the deadline for a given amount repayable (expressed in years and months) or how much we save each month in fees if we keep the term.

Normally, it is more the former, reducing the time maintaining the same rates, since it saves more than in the second, reducing the monthly holding period, being less subject to the time the mortgage interest payments.

Here also will be important to the quantities that we charge for partial cancellation fee.
Example of using mortgage calculators to calculate the partial repayment savings

Here is an actual example using the calculator to write-downs of a well known financial institution:
Outstanding Capital 33,703.54
171.09 Monthly
Shares outstanding 429
5.106% Current interest

As we see, the mortgage was constituted 40 years. The borrower, as their financial situation is good, he decides to partially repay the mortgage with a savings of 6000 € at its disposal. Consider the two options you have:
1. Reduce the time and keep the same share

The new location will be:
Capital pending amortization 27,752.30
Monthly 171.09 (we keep the same)
Shares outstanding 276
Total amount to settle 6032.40

(Here are included the interest due the month in which we are until the day of redemption and the partial cancellation fee).

Therefore, with these savings get € 6032.40-time payment of 153 months, ie 12 years and 273 days. In those months we had paid 153 x € 171.09 = € 26.176.77 (provided the interest is fixed). That is, we saved € 20,176.

Actually, we should value those future monthly capital to date, and to discount the influence of interest rates. The capital is always compared to the same point in time so that comparison is correct. That is, as not worth 100 € to 100 € today in 10 years. But to show that the savings that we assumed a partial write is attractive, that cancellation fees are not to influence the decision, and to reduce time is better than lower fee, the calculations are valid.

Finally, to note that although these 6000 € to repay rent will stop in the future, we assume that the cumulative return we get to the end will be lower than the interest we pay, because as a rule, the interests of a loan over its lifetime are greater than the return on that capital over the same period. Otherwise, banks would invest all the money instead of lending it.
2. Reduce the fee and keep the term
Outstanding Capital 27,752.30
140.63 Monthly
Shares outstanding 429
Total amount to settle 6081.82

(Here are included the interest due the month in which we are until the day of redemption and the partial cancellation fee).

In the time remaining, we will pay 429 x € 140.63 = € 60,330.27. If we had not depreciated, would have to pay € 429 x 171.09 = 73397.61. The difference is € 13.067.34

As we see, the committee for partial repayment is very low (about 1%), and does not affect too much on the decision to write off or not. If this money really have it as surplus, it is worth amortization. And with the calculations show that the best option when we can maintain the current quota period will be to reduce, as the final savings is far superior to that achieved if we reduce quota.