Tue 14 Aug 2007
If you consider a mortgage loan to finance the purchase of your property, they are two aspects that will tell how much you can borrow.
The value of the property – A valuation company will determine the value of the property, in some case the valuation and the purchase price may differ greatly.
You pay the valuation process ( a valuation is like a survey report) whether you get the loan or not.
Income - Spanish lenders generally calculate a ratio of your net disposable income that will be used to repay borrowing and will want to ensure that you have the ability to service the loan. If it is a family or joint purchase then multiple incomes can be used. lenders usually
recommend that the monthly instalment you will have to pay for the mortgage loan, should not exceed a certain percentage -around 30%- of your monthly income. It is safer for you: you avoid the risk of non- payment if you have unexpected expenses.
Repayment period, how long can you repay ?
Up to 30 years , however, if you are 55 and you want a 30 years loan, you will have to add one of your children or another family member in the mortgage.
A what interest rate will you pay ?
Spain follows the Euribor (Euro Interbank Offered Rate ), currently August 2007, it is at 4,64 % there is a mortgages calculator at http://www.euribor.com.es/calcular-hipoteca/ ( it is in Spanish but it is very easy to use)
They are many types of loans available :
Fixed Interest Rate Loan
A loan with an interest rate that will remain at a predetermined rate for the entire term of the loan. Pro: it offers some security knowing in advance what you will pay Con: If the interest rate goes down you will not benefit.
Variable Interest Rate Loan
This is one goes up and down depending the interest rate, it allows to benefit from a falling rate, but it also incorporate the rise.
Mixed Interest Rate Loan
With this loan you have a period with fixed interest rate a couple of years, then a period with variable interest rate of another couple of years.
It is recommend to start the mortgage process prior seeking a property , if you use a mortgage broker , you have the benefits of receiving all the lending options and an pre-offer that can help avoid seeking a property you cannot afford.
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