Mortgages have become significantly more expensive this year. According to the Bank of Spain, the average price of housing loans granted in September 2023 was 4.11% APR; the highest since February 2009. And what is the reason for this increase? Mainly, to the rate increases carried out by the European Central Bank to contain the high inflation in the eurozone.
In a context like the current one, it is essential to compare the offers of several banks to identify the cheapest one and not pay more than necessary. But you should not only look at the interest: according to the financial comparator HelpMyCash.com, you must calculate the total price of each mortgage requested, including all the possible expenses that the entities hide in the fine print of their proposals.
To begin with, the comparator advises calculating the monthly payments that each mortgage will have. In principle, this information must be provided by the bank itself when it presents its offer, but you can also use an online installment simulator to see how much would be paid in various scenarios: with a more or less high amount, with various terms…
For example, let’s say that a client wants to request the BBVA Fixed Mortgage, whose interest is from 3% for a term of 16 to 30 years. If you need 150,000 euros and want to return the money in 20 years, the installments to pay will be 831.90 euros, so you will pay a total of 199,655.14 euros when the repayment period ends. And if the term is 30 years, the monthly payments will be 632.41 euros and the total to be returned will amount to 227,666.18 euros.
In that case, the quotas could change depending on the value of the Euribor, which is the index used to calculate the rate applied on these products. Therefore, to stay healthy, it is advisable to calculate how much the monthly payments would be with a low Euribor (such as 0% or 1%) and a high one (4% or 5%).
Secondly, according to HelpMyCash, you must also calculate the total to be paid for the products associated with the mortgage. In most cases, to get a good interest it is necessary to contract several bank services: insurance, cards, pension plans… And these can cost money, so you have to take them into account.
For example, the 3% interest on the BBVA Fixed Mortgage can be obtained in exchange for direct debiting the payroll (at no cost) and contracting home and amortization insurance with the bank. For an average client, this entity states that home insurance will cost about 300 euros per year, while amortization insurance will have a single premium of about 7,281.65 euros. For a term of 30 years, that would mean paying a total of 16,281.65 euros.
Finally, we must calculate the price of the commissions. Most banks no longer apply an opening fee, but those that do charge between 0.15% and 1.5% for this concept. For example, if you want to take out a mortgage loan of 150,000 euros and it has an opening fee of 0.5%, you will have to add 750 euros to the total price of the financing.
You should also look at the possible maintenance fee for the account associated with the mortgage (the one used to pay the installments). Depending on the bank, its price can be between 0 and 50 euros per year. For example, if it costs 50 euros per year and the term of the mortgage loan is 30 years, a total of 1,500 euros will have to be paid for this concept.
According to HelpMyCash, it is advisable to follow this process with all mortgage offers presented by banks. In this way, the client will know which entities offer the best conditions and will also be able to ask for counteroffers from other financial institutions to see if any are willing to lower their prices.
However, there is not always time to compare, in that sense the comparator recommends hiring an intermediary. “The mortgage broker is a professional who is in charge of searching for the best mortgages and negotiating the conditions for his client. His objective is to obtain the offers that are most beneficial and adjust to the “perfect mortgage” of each client,” they point out.
Likewise, comparing offers will help the applicant assess whether they can afford to pay the fees and the rest of the expenses associated with the mortgage. In that sense, from the comparator they remember that it is not advisable to use more than 30% of the net monthly income to face financial debts, that is, the monthly payments and other costs of the credits that have been signed and of which you intend to hire.
