The best way to choose a mortgage is to know exactly what you want or need and to analyze the different options. Your bank is a good option, as you know them and they know you best and, in most cases, they can offer you the best deals. Although it is normal that, as it is a very important financial transaction, you also check the conditions at other entities.
The APR, what is it?
The first and most important thing when choosing a mortgage is to know and understand the concept of APR (Annual Percentage Rate). The APR helps you compare different loans, with different conditions of interest rates, commissions, expenses, terms, and amortization methods. It is an indicator in the form of an annual percentage. The mathematical formula is defined by Ministerial Order EHA/2899/2011, of October 28, on transparency and protection of customers of banking services and must be applied and reported by all entities.
The APR takes into account all the costs charged to the borrower and other variables (amount, term, amortization method, etc.). Banks are required to provide information about the APR in the advertising of all mortgage loans and to reflect it in the pre-contractual information that the client receives regarding the payment of their loan installments.
To compare the APRs of different loans, keep in mind that for variable rate mortgages, the APR is calculated assuming that the rates remain constant at the value they have at the time of calculation, since it is not known what their future evolution will be.
Other factors to consider
In addition to the APR, there are other important issues to consider and compare between banks. This is information that banks must give you when you request conditions:
- The maximum loan amount and its duration.
- The conditions, if met, will allow the loan to be subsidized and a lower payment to be made.
- The conditions required for the possibility of early repayment and its costs.
- The monthly payments that will result.
If you are going to buy a flat from a developer and you are taking over the mortgage that was granted to him, you must also have all this information before signing it in order to be able to compare the conditions with other entities.
Taking all this into account will help you choose the best option for purchasing your home, which will allow you to make payments in the most comfortable way for you.
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