mortgages in spain

Tips before taking out a second-home mortgage

When contracting mortgages for second homes, the first recommendation is that you compare the conditions of the different offers on the market, with the aim of choosing one of the best variable mortgages or locating one of the cheapest fixed mortgages on the market.

Once you know the conditions of the mortgages for second homes, it is advisable to make a simulation, to know in detail how each one will affect the personal finances of the consumer, checking from the total amount that can be paid at the end of the life of the loan, to the quota that must be paid month by month.

When it is clear which loan is more interesting, it is time to contact the bank that offers it to request complete information about the conditions. Sometimes, the entities do not make all the information available to the client until they have expressly stated their intention to contract a mortgage loan. That is why it is very important to ask the bank for a breakdown of the mortgage costs.

With all this information, it is the moment to negotiate the conditions of the mortgages for second homes. You must not forget that in a mortgage loan almost everything is negotiable, especially everything related to the commissions. Negotiating the interest rate is a bit more complicated, but you can also try. If you make the financial entity see that the client is a person with a solvent economic profile, capable of facing all the payments, it will be easier to improve the conditions of the loan and to offer a cheaper mortgage.

In this sense, if when signing the mortgages for second homes the consumer provides the property where he or she usually lives as an additional guarantee, it is very likely that the conditions of your new mortgage loan will improve. Likewise, the more guarantees offered to the bank, the higher percentage of financing can be obtained.

It should also be remembered that a good option for obtaining the best conditions for a second home mortgage is to choose a residence that forms part of the bank’s stock of properties

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What aspects should be analyzed before contracting a mortgage for a second home?

  1. Interest
    This is what determines the price that will be paid to borrow money through second home mortgages. Whether the rate is fixed or variable, it is essential to compare different offers to determine whether there are lower interest options and to run simulations to see if we will be able to pay that price over the life of the loan.
  2. Fees
    When taking out mortgages for second homes, the first fee a consumer may have to pay is the opening fee, which serves to cover the costs of making the money available to the user.

Another fee that may apply to this type of loan is the compensation for withdrawal. This charge is applied when the consumer decides to make an early repayment of his mortgage: that is, when he pays back the debt (or part of it) before the end of the initially agreed repayment period. By means of this commission, the bank ensures that it will receive a compensation in case the client settles the loan before time since, by means of this operation, he will be stopping paying the money of the interests that would have been generated during the term of life that still had the mortgage.

On the other hand, in the case of fixed-rate second home mortgages, an additional fee may also apply: the compensation for interest rate risk. This charge would only be applied in the event of early repayment and provided that the interest charged by the institution for its mortgages had been reduced with respect to that being paid by the customer. Thanks to this fee, the bank would earn extra income to compensate for the loss of income it would have if it lent another user the money that the consumer had paid back early.

  1. Related products
    Both in mortgages for second homes and in those granted for the purchase of a primary residence, the entities usually charge interest that will be conditioned to the contracting of a series of additional products. In other words, in order to obtain the interest that an entity advertises, it is necessary for the consumer to commit to contracting, for example, cards, insurance or pension plans with their bank. When analysing the linkage required by a given offer, two issues must be taken into account:

Firstly, that the products most frequently offered within these bundles are insurance (e.g. home and life insurance), credit cards (with which a minimum charge normally has to be made), salary accounts (subject to the direct deposit of a minimum salary and the direct deposit of several bills) or pension plans (to which a minimum annual contribution must be made).
On the other hand, one should not lose sight of those products linked to second home mortgages, which usually have a cost. It is important to consider what impact these costs will have on the total cost of a mortgage, and to analyse whether it will be possible to meet these costs throughout the life of the loan. Because if you stop having some of these products, the interest of the mortgage would go up again.

  1. Maximum repayment term
    This is the period that the client will have to pay back his debt with the bank. Normally, in this type of product it is usually somewhat shorter than in those granted for the purchase of a habitual residence.
  2. Maximum percentage that they finance
    This variable indicates how much money you can ask the bank for to buy a second home. This amount is determined as a percentage of either the appraised value of the property or the purchase value (usually the lower of the two). As with the maximum repayment term, in this case, second home mortgages also tend to offer a lower percentage than those loans for the purchase of a primary residence.

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