If you are thinking of buying a house and need to apply for a mortgage, pay attention. In this article, we will explain some of the most important financial concepts you should know before sitting down to negotiate with your bank. Information is power and it is better to know the meaning of how to get out of payday loans without paying.
This is what you need to know before applying for a mortgage
The mortgage payment is what you will pay each month until you return the entire loan received. Does this mean that if you pay 400 euros per month you will cancel 400 euros of debt? No. The fee is composed of capital and interest. The capital is the money that you have borrowed and that you have to repay, while the interest is the price you have to pay to receive the loan.
French amortization system
The payment of interest on your loan is governed by a repayment system known by that name and characterized by the constant quotas. This means that each month the bank receives interest based on the capital that remains to be amortized. As a result, during the first years of mortgage is when you pay more interest, while in the final period of the loan almost everything that is amortized is capital.
Compound interest is your friend when you invest and your enemy to get into debt. The total amount of interest you will pay for your mortgage is based on the number of years it takes to return it. This means that for two mortgages of the same amount and with the same interest rate, if one is 20 years and the other 40 years, for the second you will pay much more interest than for the first.
The guarantor is the person who is responsible for paying the debt. In case of default, he will answer for you with all his assets. The normal thing is that in a mortgage loan the guarantee is the house itself, so if you do not return the loan, the bank keeps your house to compensate the debt. However, sometimes banks can ask for a third party’s guarantee when applying for a mortgage.
Commissions are fees charged by most financial entities as consideration for certain services, such as applying for a mortgage. In the case of mortgages, you can find commissions of all colors (opening, the risk of interest rate, novation or subrogation, partial or full amortization …). The idea is that your mortgage loan has less better.
Taxes linked to the mortgage
When applying for a mortgage you are required to pay certain taxes. On the one hand, there is the Tax on Documented Legal Acts, which both the client and the bank pay. In the case that the house is new work must also pay the Value Added Tax (VAT). On the other hand, if it is a second-hand dwelling, it is necessary to face the Patrimonial Transmission Tax.