Some things to consider when evaluating a mortgage
Tuesday, February 15, 2011 @ 4:26 PM
As I have mentioned already, this blog is not an elaborate essay writing, it's only a blog. So we go straight to the meat of the post:
So let's assume that you are looking around for alternatives to your current mortgage/hipoteca. What should you look out for? Here's some elements that you may or may not know, I didn't:
- Watch for the difference between initial interest rate (usually valid for the first year) and the interest rate to apply in subsequent years. Normally, if you go for a variable interest rate mortgage, they would be some value on top of Euribor, but sometimes it's not. Be careful if there's some limit below which it cannot go etc.
- Always ask if the bank has a "convenio" with your profession. In Spain many professional associations have special deals with banks and they are wildly varied. For example teachers get preferential interest rates, in theory because of the stability of their job - but this depends on the bank and the school, each agreement is separate. So it's worth asking whatever your profession is, even if you are independent contractor, you never know.
- See what conditions are attached. For example, the new bank might demand that you take a life insurance policy via them, that is a typical condition. Consider that even if you already have your own, their policy might be more beneficial if it does away with the account costs or credit card charges or any other side benefits that are not obvious at first sight.
- Some banks cover some of the refinancing costs. I only know of Barclays Hipoteca cambio de banco, but maybe you can leave a comment with others you know of, who cover the legal and administrative costs of changing your mortgage bank. However they may not cover the cancelation penalty of your old mortgage. On that note, beware the new laws specify a maximum penalty of 0.5% regardless of what the actual contract says. Don't pay more!
Next post will be about the differences between a "subrogacion" of a mortgage and outright cancellation. There are some pitfalls there too as I've discovered to some (not much) pain. Thanks for reading.