Taking a mortgage loan to buy a property - what we need to know?
Not many people can afford to buy a property with their cash. Most young people take out mortgages, which they pay off for years to get their dream home. Here's what to keep in mind if you're still considering taking out a mortgage:
Mortgages do not cover the full amount of the transaction
For some people, this may be new information, but you can't count on a mortgage to be 100% of the value of the property. The bank that grants it will require a deductible on your part of about 30%. It could fall to 20 percent if the property is good and the bank may decide it is worth taking the risk. If you do not have savings available, an option that some people resort to is to cover their deductible with a consumer loan. We do not recommend this as an option. You better wait for the money to be collected and then apply for the remaining 70-80% you need.
You can refinance your loan on better terms
If you took out a mortgage loan at a higher interest rate, and after a while you see that interest rates have fallen, you can consider the refinancing option. This means taking out a new loan on more favorable terms, with which to repay the previous one and repay this one. Depending on the difference in interest rates, you can expect to return even up to several thousand levs less. However, you should keep in mind that there are penalties for early repayment, as well as fees for reviewing the new loan.
Interest rates are never constant
Keep in mind that interest rates are never fixed for the entire period of the contract. They can be fixed for a certain period, but then become floating and unusually high. See how the interest rate is calculated at the bank from which you take the loan (this is public information) and you can make your own approximate calculations for the movement in the years to come.
Always consider the final amount you will pay
Many people think that loans for a longer period of time are more profitable because they have a smaller monthly installment. What you need to consider in this case is the final amount you will pay to the bank. Yes, it may be more profitable for you to pay more years for a smaller amount per month, but it may be that with a little effort you can handle your loan in less time. And pay less money.