In Spain, mortgages are rarely competitively priced if the client does not agree to contract other products or services from the bank. As a general rule, entities only offer a good interest rate if, in exchange, the payroll is domiciled, one or more insurances are subscribed through their mediation or other less common links are accepted, such as opening a pension plan, using a card or even install an alarm.
If the client accepts all the extras proposed by the bank, they can get a considerable reduction in interest: between 0.10 and 1.50 percentage points, depending on the policy of each financial institution. For this reason, it is very common for the applicant to agree to contract several combined products, which is the name given to those products or services that allow the applied rate to be reduced.
These associated products, however, cost money on many occasions: you have to pay insurance premiums, commissions for cards or pension plans… For this reason, there are many customers who wonder if it really pays to accept the proposed links by the Bank. To find out, according to the financial comparator HelpMyCash.com, it is important to do the numbers and also assess whether the product or service meets the applicant’s needs.
The analysts of this comparator recommend calculating how much will be paid in case of accepting all the associated products proposed by the bank and how much will have to be paid if these extra services are not contracted or if only some are subscribed. In this way, the client will be able to assess whether it is worth “tying” himself even more to his entity or if, on the contrary, it is only convenient for him to sign the mortgage and nothing else.
For example, let’s say that a client is interested in the BBVA Fixed Mortgage, whose interest from 2.90% to 30 years is reduced by 0.50 points for contracting the bank’s life insurance and by 0.50 points more for domicile the payroll and to subscribe your home insurance. With the data provided by this entity, if 150,000 euros were needed to finance the purchase of the home, the total to be paid would amount to 248,807 euros.
On the other hand, if you do not take out life insurance, the total to pay would be 263,073 euros. If the client chooses not to comply with the requirement of direct debiting the payroll and taking out home insurance, the total cost of the mortgage would be 255,791 euros. And if you do not accept any link, you should pay a total of 270,542 euros over the 30-year return period.
But money is not always everything. According to HelpMyCash, the client must also assess whether the combined products offered by the bank to reduce their interest really suit their needs. If this is not the case, perhaps it will be more advisable to ask for the mortgage from other entities that apply competitive interest rates without requiring these services (or that subsidize you for subscribing products that are convenient).
For example, let’s say that the person who wants to contract a mortgage is a customer of a certain age, who does not have children and who does not consider having them in the future. And let’s imagine that the bank only applies good interest if you agree to take out life insurance, which is a product that covers the payment of the debt if the owner dies (so that his children do not inherit it). In this case, it will surely be more convenient for you to request financing from another entity, since you will never need the coverage of this insurance.
Finally, from HelpMyCash they remember that hiring bank products is not the only way to lower the interest on a mortgage. There are entities with an environmental conscience, for example, that reduce the price of their loans if the house that they intend to buy has a high energy rating.
This is the case of Banco Mediolanum. Your Freedom Mortgage, which allows you to finance the purchase of any apartment or house, has variable interest from Euribor plus 0.79% (0.99% fixed the first year). On the other hand, the Freedom Green Mortgage, exclusively for acquiring a home with an energy rating of A or higher, has a considerably lower rate: from Euribor plus 0.65% (fixed 0.99% for the first year). In both cases, the interest is discounted for domiciling the payroll and contracting the entity’s life insurance.
