“We live beyond our means.” That is the mantra that was heard during the financial crisis that began between 2007 and 2008, when many Spanish families discovered that they had paid too much to buy their homes and that, in some cases, they could not meet their mortgage payments. The consequences of the bursting of the real estate bubble are sadly known: evictions skyrocketed and the price of houses and apartments plummeted.
What happened can no longer be changed, but we can learn from past mistakes so as not to make them again. According to the financial comparator HelpMyCash.com, “there is a simple trick to calculate if you will be able to pay the mortgage and to find out what house a person can afford based on their salary: apply the 30% rule.”
This rule indicates that the mortgage payment that is contracted, added to that of the other credits that are in force, cannot exceed 30% of the net monthly income of the future owner. According to the comparator’s analysts, “staying below that percentage allows you to have enough money at the end of the month” to meet the rest of the expenses that a person may have and to maintain a certain level of savings.
For example, let’s say that a person earns 2,000 euros per month net and pays 150 euros for his car loan and 25 euros per month for a credit card. In this case, his future mortgage payment should be a maximum of 425 euros, since then his total debts would not exceed 30% of his income (600 euros).
But this rule not only serves to know the maximum payment that a person can pay, but also to know what housing they can afford. HelpMyCash has a free online simulator that calculates what house or apartment a user can buy based on their net monthly salary and what they pay each month for the debts they currently have in force.
The choice of mortgage will also determine what home the potential buyer can afford. According to HelpMyCash, “the lower the interest on the mortgage loan you take out, the lower your payments will be and, therefore, the higher the price of the house or apartment may be.”
And what are the mortgages with the lowest payments? At a fixed rate, the comparator’s analysts assure that offers can be obtained with an interest rate of less than 3%. For example, EVO Banco’s fixed-rate Smart Mortgage has a rate starting at 2.90% in exchange for direct debiting the payroll and contracting home and life insurance with the entity.
At a mixed rate, on the other hand, you can obtain a fixed interest of around 2.75% for the first ten years and less than Euribor plus 0.80% for the following years. This is the case of the Open Mixed Mortgage from Openbank, whose rate is from 2.63% fixed for the first decade and from Euribor plus 0.55% for the rest of the term; in exchange for direct depositing the income and signing the life and home insurance policies proposed by the bank.
Finally, if you prefer a variable interest, HelpMyCash states that there are banks that offer variable mortgages at less than Euribor plus 0.50%. The EVO Banco Smart Mortgage, for example, has an interest rate from Euribor plus 0.48% (2.30% fixed for the first two years), which can be obtained in exchange for direct debiting the payroll and taking out two insurance policies with the entity (home and life).
