The mortgage issue is a sore point for a large part of our citizens. On the one hand, everyone wants to live on their own “square meters”, on the other it is not possible to save for them on their own, and bank loans are provided on such terms that the overpaid funds could easily buy the same apartment. However, if you really want to reduce the amount of these overpayments, but you need to do a good job.
The rate value as the main indicator of the loan cost
The main indicator of the loan cost is the interest rate. By itself, it can be of two types-floating and fixed. The latter type, as the name suggests, is a certain amount that does not change over the entire repayment period. Subsequently, even if mortgage rates fall, you will pay your inflated rate, unless you refinance the loan. However, if mortgage rates increase, this will not affect you either.
The floating rate also has a fixed part, where the bank puts its mandatory profit, but it also has a mobile part. It is tied to one of the existing stock indexes and therefore clearly responds to market fluctuations. If the index starts to fall, you will automatically start saving on your mortgage. However, if the index increases, you will also automatically pay more.
The value of the housing loan rate is formed under the influence of many additional transaction factors, one of which is the initial payment. Of course, there are banks that offer mortgages without a down payment, but such loans are not exactly cheap.
What else will a cheap mortgage depend on?
In addition to the interest rate, a cheap mortgage will depend on other factors. In particular, this is the currency in which the loan will be issued. Loans in foreign monetary units are always cheaper than in dollars. However, the borrower faces a different danger. It consists of losses on conversion, which many cannot avoid since they receive their salary in dollars. And given that a mortgage is a long-term loan, it is very difficult to predict all possible currency fluctuations. Speaking of deadlines, they also affect the amount of the final overpayment.
First, the longer the repayment period specified in the mortgage transaction, the higher the bank’s rate will be. Second, over a longer period, the borrower will in any case overpay more, regardless of the type of payment. However, if the bank gives you a choice, then to reduce overpayments, it is recommended to choose a differential method, because, with it, interest and principal debt are extinguished equally proportionally.