Choosing a mortgage that meets our financial needs is not always easy. In fact, it must always be taken into account that a mortgage (ie home financing) can last between 30 and 50 years.
It is essential, therefore, to look for the loan paying close attention to the contractual and financial conditions, which allow us to obtain the best commercial offers on the financial credit market, choosing the right mortgage that meets our needs.
How to proceed with choosing a home loan
Before turning on a mortgage on your home it is important to take into account the civil and contractual disciplines that it possesses. In fact, before buying any type of property, it is good to evaluate in depth the various options that banks and other credit institutions offer to their customers.
In fact, we must never be satisfied with the first mortgage we are subjected to, but by carefully analyzing the various proposals, we will also be able to save a lot of money.
The civil code defines the loan in Article 1813 as: a contract by which one party delivers to the other a certain amount of money or other fungible things and the other obliges itself to return as many things of the same species and quality.
In other words, from what is understood in this article, it is that the operation of the loan takes place through an exchange, variable over time, between the lender and the borrower.
In the civil code this type of contract is included among those for “consideration”, that is the borrower, besides repaying the entire amount, must also pay the interest established on the contract at the time of the signature to the credit institution in which he has opened the loan home.
Also appearing in the article of the civil code as a “real contract” in which the lender pays the borrower a certain sum of money, and the latter takes charge of the obligation to return the entire amount credited.
How does the home loan work?
There are several aspects to consider before turning on a mortgage. We list some aspects to make you get a clearer idea.
As we have already said, the first thing to take into account is not to be satisfied with the first contract that is submitted to us, but being a binding contract for more than 20 years, we must choose it with extreme care, also comparing the various pre-contractual documentation.
Always request the PIES European standard form to compare all the documents, so we will be sure to check all the loan conditions and the amount of the financial plan.
Pay attention to the Tam and to the spread : the spread is nothing more than the value that shows the gain of a bank given by the mortgage, applying an interest rate to ensure a gain on this loan and on the risk of this transaction and on management fees. While the Tam is the actual annual cost of this loan, which also takes into account additional costs and additional costs, in fact we must also consider the difference between Tam and Fen. If the differential values of Tam and Fen are high enough, the cost of this mortgage will probably be quite high.
We must also evaluate the duration of this funding.
In fact, the duration of the loan affects in particular the actual cost, considering that longer durations consist of a higher risk for the banks, or for the credit operators, and therefore consequently there will be a higher interest rate. For long-term loans of 15 to 20 years, this variable rate will have fewer points than a 20-year loan.
Consider the loan to value parameter.
A further aspect to consider is the loan to value parameter, which indicates the ratio between the amount for the loan requested and the value of the property that holds the person requesting it, placing it as a guarantee for the loan.
In fact, through this system the risk will be deducted: the lower the risk, the better the conditions for paying off the loan.
Home loan: Is it better to choose the fixed rate or the variable rate?
The rate to choose varies according to the availability we have and how much we are willing to take on the risks.
The fixed rate will in fact allow you to have a constant installment and that does not change during the whole duration of the loan, but there will be no advantages on any exchange rates and reductions on financial market rates.
While the variable rate depends on the periodic duration of the installments which varies its amount over time.
But choosing the variable rate is always a risk, if the market rates rise the installments will be more expensive, instead if the rates are lowered we will have instead a decrease of this installment.
Today, however, the fixed rate has very low values, and therefore choosing a rate that lasts longer has almost the same cost as a variable rate.
As we have already said before, for the rates, it is necessary to take into consideration the Tan and the Tam.
You can change your mind at any time.
In fact we can decide whether to pay all or a small part of the loan and change bank, using the transfer of this mortgage at another at a free cost. In fact for mortgages turned on in previous years, changing could save a lot of money in about a year.
Home Mortgage: Is it mandatory to take out insurance?
We remind you that to make you accept a mortgage, it is not mandatory to open a current account in the bank in question or to take out any kind of insurance that it offers us.
Whatever problems you encounter, remember that making a claim in writing to the bank is your right.
The bank is obliged to answer you within 30 days of receipt, if you do not get answers, or if you do not think they can be satisfactory, you can appeal to the bank and financial arbitrator.
Generally the contracts stipulated of the loan provide for the insurance of explosion and fire on the house, while others appear to be optional as cases of death or loss of work. Once again we remind you that it is not mandatory to take out these policies.
The bank provides loans with taxes not exceeding 33% compared to the monthly income that the borrower owns.
To increase the value of this mortgage you will need additional additional guarantees, in fact, not only the mortgage on the house but a guarantor that guarantees the payment of the latter.
Another limitation imposed by the bank is that it does not provide more than 80% of the value of the real estate register. This means that to buy any type of property, you must already have 20% of money to spend on notarial deeds and cover any costs of the real estate agency that takes charge of bureaucratic matters.
What are the main elements for entering into a home loan contract?
The loan contract must have certain requirements to ensure that it is validated as: cause, agreement of the reciprocal parties, the object and the form.
A mortgage is in fact linked to regulations.
The cause is nothing more than the exchange between the benefit of a building and the payment of the interest of the mortgage itself.
While the agreement of the reciprocal parts is given by the institution that delivers the amount and who benefits from it.
In fact, with the disbursement of this money, whoever requests it becomes its owner and can use it freely.
However, before the bank provides these loans, there are mutual premises, in which the latter delivers the agreed sum and may refuse to fulfill this promise in the event that, whoever requests the loan, fails to comply with the agreements made in the contract.
While for the form, the text must be written by a notary and must be clear and complete with information on the transfer of ownership, the identification of the property, its suitability and many others.
Other fundamental things for the opening of the mortgage are:
Present documents that will be used by the bank, or by third parties who provide the sum, to assess the total assets and financial situation of the person requesting the amount.
Thanks to this information, the person in charge of the case will be able to establish the actual value of the guarantees we provide them.
Let us also remember that it is good first to have the property evaluated by engineers, architects and surveyors to establish the actual value of the property in order not to risk paying more than necessary, but in any case these costs are borne by the applicant.
Once the due estimates have been completed, the institution will communicate the outcome through the use of credit instruments, which will allow to establish whether the person requesting the sum is able to return it.
In the event that the request is accepted, we will proceed with the signing of the aforementioned contract in which all the mutual and financial conditions to be fulfilled will be reported, where the monthly installments to be paid to the institution, the interest rates are reported. that will be applied and the payment conditions.
Once the mutual plan is approved and the financial conditions of rates, amounts and so on and those foreseen by the interested parties, the bank will proceed to pay the amount of the aforementioned loan.
Home Mortgage: Conclusions
To summarize what we have already said, it is essential to take the time to look for the best mortgage based on our needs.
In fact, it is always necessary to compare the documents supplied to others, in order to be able to choose in a more conscious way the proposal that comes closest to us.
We must also take into account the fixed and variable interest rates of the loan agreements, choosing them according to personal needs, with the possibility of always changing ideas and deciding to pay the entire sum agreed or half the amount.
In fact, fixed interest rates do not enjoy the benefits that the variable rates have, but roughly have almost the same price.
Change bank at any time for free through the transfer systems, also taking advantage of some deductions given by rate changes for those who have already turned mortgages in the past.
Also evaluate the duration of the repayment of the loan, since the less time it takes to return it, the less interest will be paid.
Respect the contractual rules when a mortgage is stipulated.
We remind you that it is not necessary to open an account at the bank that provides the loan for the loan, nor is it obligatory to adhere to certain insurance policies, even if the bank tends to make them binding on the contractual terms.
It is also necessary to provide all the applicant’s information to the bank, so that anyone who deals with the handling of these practices can better evaluate all the conditions set.