Formalizing a mortgage is a crucial transaction for bank customers. After all, a significant amount of money is at stake when taking out this financial product. However, thanks to the ongoing offers from banks, you can secure mortgages with better terms, potentially saving you money. There are many strategies you can use to choose the best mortgage currently available. Are you ready to take on this challenge?
Mortgages represent one of the largest outlays you'll have to make with your bank. They typically exceed €100.000 and have very long repayment terms that can extend for practically your entire life. These characteristics indicate that this is a banking product that deserves your attention, and you should only formalize the contract when you are in a position to repay it within the agreed timeframe.
Now that you're just a click away from your mortgage , we're going to outline some guidelines to help you get a mortgage with better terms. It won't be difficult to follow thanks to the increased flexibility of this financing model in recent years. You can even access a range of offers and promotions that were completely unthinkable just a few months ago.
Cheaper of money
To better understand the current state of mortgages in Spain, it's essential to examine the monetary policy of the European Union's economic authorities, and specifically the European Central Bank (ECB). As a consequence of the economic crisis that has gripped the continent, and whose effects are still felt today, there has been no alternative but to lower interest rates.
Because, in fact, the EU monetary authorities have driven the price of money in the eurozone to 0% , its lowest level ever. This is unprecedented. In practice, it means that the value of money in this geographical area is zero. So, how does this affect mortgages? Quite simply, to adapt to the reality of the financial markets, banks are having to reduce their spreads. This way, you can benefit from cheaper loans as a result of the narrowing of these percentages that determine what you have to pay for your mortgage.
There are also a number of marketing strategies, some more aggressive than others, that banks are using to sell their products, and these strategies are helping you pay a more affordable monthly mortgage payment than before . These strategies include various reductions in fees and other management or maintenance costs, and even their complete elimination in the loan agreement. Given this overall scenario, it's fair to say that taking out a mortgage is now more advantageous. At least more so than a couple of months ago, and certainly more so compared to previous years.
Mortgage: reductions in spreads
The first factor that will help you improve the terms of this special line of credit is that you're now facing much more competitive interest rates. While in previous periods it was common to find rates around 2%, or even higher, this is no longer the case. Many financial institutions are now offering rates below 1% , which represents a significant source of savings compared to previous mortgage financing models.
In fact, a very particular battle is brewing among banks to see who can offer the cheapest mortgage in the sector . This situation is benefiting your interests and those of all users. Because as a result, better offers are being developed for these types of banking products, without having to give up any benefits. It may even be worthwhile to take on debt under these market conditions.
ING Direct and Liberbank are among the banks offering these deals to their main customers. They're offering very aggressive proposals, some even with no fees or additional costs from the outset. This approach is, in turn, prompting other banks to lower interest rates on their mortgages or to maintain a series of incentives to attract customers. In some cases, these incentives aim to increase customer loyalty.
Euribor below all-time lows
Another factor that benefits your transactions is the depreciation of the European benchmark index, known as the Euribor. According to data provided by the National Institute of Statistics (INE), it is linked to approximately 90% of new variable-rate mortgage contracts signed to date. This is higher than other, less common indices, or at least those that lack consumer confidence.
Well, the big news about the Euribor is that it has moved into negative territory, and for the first time ever, it is trading below 0% . This comes after reaching 5,384% in 2008, the year of the economic crisis. As you can quickly see, this represents a more than considerable reduction in recent months. If the cost of money is practically zero, something should be reflected in mortgage rates.
How do you notice this fact with the main benchmark of mortgages? Well, very favorably, since in some cases you will have less demanding monthly payments, and in others a more competitive differential. You will always come out winning in any case. But that in situations where there is a floor clause it will be enormously detrimental to achieving your objective, which are none other than formalizing a cheaper banking product.
Credits exempt from commissions
Another very positive aspect that will encourage you to choose a good mortgage is the gradual elimination of fees and other management costs, a result of the current favorable conditions in the financial markets for this product. This also serves as a powerful incentive for you to choose these mortgage models over other options without this feature. They are trying to attract their customers' savings.
More and more banks are adopting this business strategy, with very positive results for your checking account balance. You won't have to pay a single euro for opening, processing, or partial or full cancellation fees. This means a significant amount of money that won't be taken from your personal accounts. As you'll gradually see, the opportunities to secure a very reasonable mortgage are increasing.
Bonuses with linking
The resources available to you for securing a mortgage with better terms don't end there. Indeed, by cultivating a closer relationship with the bank, you'll be in a prime position to achieve a reduction in your current interest rate. This reduction will be around a few tenths of a percentage point, and to do so, you'll need to subscribe to some of their main products (investment funds, pension plans, savings programs, insurance, etc.). As you subscribe to more products, the profit margins will increase, reaching up to 1.5 percentage points above the original prices. This is the difference you'll save if you choose these options to finance your home.
A new strategy focuses on tailoring proposals to new clients. Their main goal is to attract more customers and prevent them from switching to competitors through their financing options. This certainly opens up another avenue for you to achieve your goals of signing a contract that is much more advantageous to your personal interests.
As a final point to all these suggestions, if you're a young person under 30, you'll also be in a position to improve the profit margins on these commercial products. This could be around one to three percentage points higher than traditional models . In return, you'll have no choice but to extend the repayment period, and perhaps even take out home insurance.
Advantages that can be generated
As the amount requested is higher, the capacity to save will be increased through these banking operations. Being able in some of the cases to generate some more than estimable benefits that will help you to defray other expenses, either of a personal nature or for the maintenance of the home.
In any case, it won't be a matter of signing the first mortgage you come across. It will be a matter of comparing them, analyzing them, and choosing the one that best suits your profile as a banking customer. This will require an additional effort to minimize the debt from this transaction, and ideally, to choose one with a shorter repayment period. This is another highly effective way to reduce the overall cost.
Knowing beforehand that it's necessary to wait, as more competitive special offers and promotions are appearing more frequently , to the point that they are being updated to reflect the country's new economic reality. It's no coincidence that even those earning around €1,000 a month can access these products through very affordable loans with more favorable interest rates. The end result is that these loans will now be more advantageous to obtain.