Mortgage credit: a practical and safe option to buy your own house

We all have the dream of our own house. This represents an investment in our future and also for our family. However, when we decide to embark on this journey we may encounter some difficulties in acquiring a home.

Today there are many alternatives and loans provided by financial institutions. New Mortgage Credits can be used to purchase your own property.

We will tell you what they are, and how you can benefit when buying your first home. Also, all the options you have.

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**What are mortgage loans

This type of credit allows people to buy a home.

It is a medium or long term loan that is granted for the purchase, expansion, repair or construction of a home, purchase of sites, offices or commercial premises.

In this case, the property acquired is secured or "mortgaged" in favor of the Bank to ensure the fulfillment of the credit and therefore this credit carries that denomination.

However, a mortgage loan can also be granted "for general purposes", that is, to use the money in projects that the client receiving the loan wants to carry out.

In this case, an immovable property is also used to be mortgaged and as a guarantee of the payment of the loan received.

The terms to which these credits are granted are several years, which must be reported within the characteristics of the credit, along with the other costs and interest rate associated (1).

**What to consider before applying for a mortgage loan?

Since it is a significant sum and a decision that has a great impact on the financial health of a person or a family, it is advisable to take certain considerations before assuming the responsibility of fulfilling the dream of one’s home.

**Thorough search

Many times, applying for a mortgage loan to buy a home or apartment is a decision that is made only once in a lifetime. Therefore, the choice of housing should not be taken lightly. A dedicated search will allow you to find the offer that best suits the needs of each person.

In addition, it will be important to have at hand information on housing prices by areas and keep informed on how the sector moves and not spend more than necessary.

**How much I can borrow

Before applying for the mortgage loan, it should be taken into account that for the same fact of being a credit, the financial institutions that grant it will review the credit history of the client. Check the level of savings and indebtedness, but the ideal is not to present studs or reported debts.

Also, it is very important to have defined the maximum amount that can be assumed, as well as the term of payment committed and the monthly fee to pay. How much monthly money can be used to pay off the mortgage loan, and for how many years will it be made? Ideally, a maximum of one third of the salary should be allocated, but the amount of the down payment should also be taken into account. The minimum is 10% of the value of the property, but it will always help to give a little more. On this point, it is also interesting to look for alternatives of green or sustainable housing that, due to their environmentally friendly characteristics, usually have more attractive prices (2).

**What is the difference between a fixed interest rate mortgage loan and an adjustable interest rate mortgage loan?

The difference between a fixed rate mortgage loan and an adjustable rate (ARM) mortgage loan is that for the fixed rate loan, the interest rate is set at the time of obtaining the loan and does not change. In the case of loans with adjustable interest rate, the interest rate can rise or fall.

Many MRAs start with a lower interest rate than a fixed interest rate mortgage. This initial rate may remain the same for months, a year, or several years. When this introductory period is over, your interest rate may change and your payment amount will surely go up.

Part of the interest rate you pay will depend on a broader indicator of interest rates, called an index. Your payment goes up when this interest rate goes up. When interest rates go down, sometimes your payment can also go down, but this is not true for all MRAs. Some MRAs set a limit on how far your interest rate can go.

In addition, some MRAs also set a limit as far as your interest rate can go.

Find out how your ARM fits. Before you get an adjustable rate mortgage, find out:

How high your interest rate and monthly payments can go with each adjustment. How often the interest rate will be adjusted. How soon he could raise his pay. If there is an upper limit to which the interest rate can reach. If there is a lower limit to which the interest rate can reach. If you will still be able to pay the loan, if the rate and payment go up to the maximum allowed under the loan contract.

Tip: Do not assume that you will be able to sell your home or refinance the loan before the rate changes. The value of your property may decrease or your financial condition may change. If you can’t afford higher payments with the income you have today, you may want to consider another loan (3).

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