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Mortgage

Some tips on how to save on the mortgage and reduce the mortgage payment

For those who decide today to buy a house with a mortgage, the moment is favored by excellent economic circumstances: here are some tips for choosing the mortgage to understand what could happen and how to save on the mortgage payment!

1. Define the financial limits
When you decide to take out a mortgage, the first fundamental step is to define our “sustainable installment” (ie how much we can invest each month in repaying the loan), also trying to imagine in advance the problems that may arise over the years, especially with mortgages at long term. The children who grow up and therefore future school expenses, unforeseen events, etc. all that in the future could affect family finances by adding to the mortgage payment. This analysis serves to understand how much we can borrow from the bank, and how to avoid excessive expenses as much as possible.

2. Do not take out loans before applying for a mortgage
Credit institutions generally do not look favorably on any ongoing financing even if this circumstance does not affect anything. The fact remains that if a repayment plan is in progress the personal financial stability of the loan applicant is at least heavy and therefore the bank may see a greater risk in granting the loan. In analyzing the income situation of the applicant, the bank must therefore also consider the amount of the loan in progress in order to define the limit of the installment / sustainable income ratio: once this relationship is defined, we could know the amount of the sustainable mortgage installment and also the maximum amount that the bank can grant.

3. Watch out for the spread (bank)
The rate of the loan is determined by the reference rate (Eurirs or Euribor, depending on whether the loan is at a fixed or variable rate) with the addition of a further bank rate, the spread. The lower this rate, the more, of course, the mortgage will be affordable.

4. Compare the loan proposals with an eye to the Taeg
For the choice of the loan it is good to compare several proposals and choose the one that, for the same services offered, offers the best Taeg rate, which represents the actual cost of the financing, including all the ancillary costs (preliminary investigation, appraisal, compulsory insurance, credit mediation).

5. Promotional rates versus full rates
A certain attention to the promotional rates that can be very favorable in the first installments: to make a prudent choice we must inform ourselves on how the effective rate will be when fully operational.

6. Mixed rate mortgages, yes or no?
Mortgages with mixed rates can be of various types: the best known is the modular loan that, for example, starts with a variable rate in the first few years (generally three years) with the possibility of changing to a fixed rate; or the constant rate mortgage that allows you to leave the monthly amount to be paid unchanged but change the type of rate applied along its duration. However, it must be considered that this type of coverage is not free, indeed: usually mixed solutions are offered with already higher starting rates. So on balance they might not be so cheap.

7. The costs of additional policies
The insurance costs related to the loan must be considered when counting the final cost of the loan (APR) and may be mandatory for fire and explosion policies. The policies that the bank proposes to protect the customer (and also the bank) in the event of death are optional: with this insurance the residual debt for the heirs is zeroed. To help the borrower choose the policy, the bank is obliged to provide at least a second quote from an insurance company outside the bank.

8. Save on the mortgage with the subrogation
The subrogation of the loan at rates lower than those of departure can allow a good saving on the installment and on the total cost of the loan: the subrogation is free because the cost of transfer from one bank to another is taken directly by the bank of arrival: not at the moment there is a limit to the possible subrogation operations, therefore monitoring the Euribor and Eurirs rates and the offers of the banks, substantial savings can be realized.

9. Reducing the duration of the loan reduces the interest paid
Want to save on mortgage interest? You need to choose mortgages with shorter durations (ideal ten years) or shorter payment deadlines: the interest on the mortgage will be lower allowing savings.

10. Maximum amount of the loan granted to a foreigner
The maximum amount granted by an Italian bank to a foreigner who does not reside in Italy is paid for a maximum amount of 60% of the appraisal value of the property that will be provided as a guarantee to the bank.
It should also be noted that not all Italian banks grant mortgages to foreigners who reside or work not within the Euro area, who can only turn to the largest banking institutions such as Unicredit, Banca Intesa, CheBANCA

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