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Buying a home is one of the most important financial decisions in your life. And when the time comes to apply for a mortgage, it’s common to focus on a single question: “What monthly instalments will I have to pay?”.
But comparing mortgages goes far beyond weighing up the instalments. The interest rate, the initial costs, relationships with lenders and the size of your own contribution can make a huge difference over the long term.
So, before signing a mortgage loan, it’s vital to fully understand the key variables and analyse the transaction with a sense of perspective. A mortgage isn’t just a loan, it’s a financial commitment that will accompany you for many years.
The price of the mortgage: variable, fixed or mixed rate
The first element that people usually consider is the nominal interest rate (NIR). In other words, the “price” you’ll have to pay for the money you borrow.
Currently, there tend to be three kinds of mortgages:
The instalments evolve in accordance with a reference index, usually the 12-month (1 year) Euribor.
When the Euribor rate rises, the monthly instalments can also increase. When it goes down, they can fall.
This kind of mortgage usually starts with a lower initial interest rate than that of a fixed mortgage, but it may lead to greater uncertainty in the long term, as the instalments can rise or fall over time, depending on how the Euribor behaves.
These combine the two formulas: an initial period at a fixed rate and another subsequent one at a variable rate.
This may be an intermediate alternative for anyone seeking initial stability and more flexibility in the future.
Fixed-rate mortgages
The instalments remain stable throughout the life of the loan.
This means greater predictability and security in the event of interest rate increases and it makes it easier to plan your family budget.
It’s a useful option for people who prioritise stability and peace of mind.
What impact does the Euribor have?
The Euribor (the average interest rate at which the main banks in the euro area lend money to each other) is a key indicator with a direct influence on numerous variable mortgages. Instalments can increase significantly in high interest rate environments.
Therefore, before choosing, it’s crucial to ask yourself:
- Will I be able to afford the higher payments if the rates continue to rise?
- Do I prefer stability, even if I have to pay a little more?
- What are my life and financial horizons?
The APR: the information that helps you to compare better
When you compare mortgages, you shouldn’t just focus on the nominal interest rate (NIR). There’s an even more useful piece of information: the APR or Annual Percentage Rate.
The APR will give you a more realistic idea of the total cost of the mortgage, as it includes the interest rate, some loan fees and certain costs associated with the latter. It’s therefore a highly useful tool when it comes to comparing the offers of different banks.
However, it’s also essential to understand that the APR may vary, depending on:
- The discounts applied
- The associated products you may take out
- The loan term
This is why it’s important to read the terms and conditions carefully and not just focus on the commercial name.
The initial costs: much more than the down payment for the property
One of the most common mistakes is to think solely about the price of the home and the monthly payments. Buying a property involves other significant costs.
Your own contribution:
The bank doesn’t usually finance 100% of the transaction. This means you’ll need:
- Savings for the down payment, typically 20%
- Additional money to cover the initial costs
As a result, many people need to have saved a significant amount before buying.
What are the up-front costs?
The costs associated with a mortgage include:
- Taxes linked to the purchase
- Notary’s fees
- Home survey and valuation
- Certificate of habitability
- Potential fees associated with the formalisation of the loan
- Insurance, including home insurance, covering any potential damage to the flat, life insurance, protecting the payment of the mortgage in the event that the owner has serious difficulties, and/or health or sick leave insurance.
Overall, these costs may account for between 5% and 7% of the value of the home, depending on the kind of property and the characteristics of the transaction. This is why it’s really important not to rush into the purchase and calculate what actual savings you’ll need in advance.
The small print: relationships with the lender and associated products
When a bank submits an offer for a mortgage, you’ll often find discounts associated with taking out other products.
For example:
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Direct debit arrangements and debit and credit cards
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Life insurance, designed to help the holder to pay off the mortgage debt in the event that he/she is unable to make the payments for a serious reason. Therefore, it shouldn’t just be regarded as a banking requirement, but also as a measure to ensure financial protection.
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Savings plans or health insurance.
These may help you to reduce the interest rate or improve the terms and conditions. Nevertheless, it’s important to analyse how much these products will cost, whether you really need them and what impact they may have on the total cost of the mortgage.
Sometimes, a seemingly cheaper mortgage can end up being more expensive if the products linked to it entail high costs. So it’s crucial to look at the transaction as a whole and not just focus on the monthly payments.
Beyond the numbers: think about your future
A mortgage has to suit your future as well as your current situation.
Before you come to a decision, analyse your job stability, calculate a margin for any unforeseen circumstances due to variations in the interest rate, avoid going into debt beyond your capabilities and keep an emergency fund.
Ideally, this fund should cover at least three months of basic living expenses in the event that you’re temporarily left without any income.
The goal isn’t just to buy a home, it’s to do so with peace of mind and financial sustainability.
✅ Conclusion: good comparisons lead to better decisions
✅Conclusió: comparar bé és decidir millor
Choosing the right mortgage involves much more than searching for the lowest payments. It’s also a matter of understanding:
- What kind of mortgage suits you best (variable, mixed or fixed)
- What the total cost of the credit transaction will be
- What initial expenses you’ll incur
- And how it will affect your finances over the coming years
🏅A good mortgage decision is one that enables you to live with peace of mind, retain your ability to save and address the future with security.
If you’re considering purchasing a home, you can view the financing options at creand.ad or get in touch with your manager, who’ll be happy to help you to compare them and identify the mortgage that best suits your current situation and your life and financial goals.
