Buying a property with a mortgage – Part 1
Getting your own home is definitely one of the highlights for the majority of the population. No matter whether the property will be for personal use or for investment purposes, financing is needed, which is often unaffordable for buyers. That is why a lot of them resort to taking out a mortgage loan. This is a difficult and complicated process. You can read more about the stages you have to go through when buying a home through a mortgage in the following lines.
Budget for purchase
One of the key steps before applying for a mortgage to buy a home is to determine your budget. In other words, you need to calculate how much you can set aside for your monthly home loan payment. One of the conditions for a mortgage loan is that you prove you have an income of between 50-65%, enough to cover all your monthly obligations, including your mortgage.
Choice of bank
The most important step here is to compare the mortgage terms that each bank offers:
- Compare interest rates and additional fees;
Compare the APR – the annual percentage rate of charge. Realistically, the APR is the total cost of the loan to you as a consumer, expressed as an annual percentage of the loan amount you will be granted; - Check what the fixed interest period is and after that period, how the variable interest will be calculated;
- Compare the maximum term of the loan;
- Compare carefully the offers of several different banks and apply for a mortgage pre-approval with the bank that has given you the best mortgage terms.
Pre-approval for a mortgage loan
It is essential that the buyer has clarity on the maximum loan amount he could obtain based on his profile and income. The purpose of this pre-approval for credit is primarily to give peace of mind and clarity on the purchase budget.
To avoid potential trouble and to make sure that when you start looking for a property, you will have the necessary funds behind you, then make sure to get pre-approved for a mortgage loan. If you are using a professional consultant, they will try to get the pre-approval in writing and not just in words from the loan officer at the bank.
Getting approved by a bank does not bind you to that bank in any way. In practice, this means that if you get better terms from a second bank after you have already received loan approval from the first financial institution, you can safely take out a home loan from the second bank.
Documents for prior approval
- Mortgage loan application form as per the bank’s template;
- Copy of identity document;
- Employment contract, service notes, copies of civil contracts, etc;
- Rental agreement, deed of ownership of the property to be rented, and tax return in case of income from rental of real estate.
Stop caparo (advance deposit)/deposit
If you have already liked a property and you want to be sure that it will pass into your ownership and that until a market valuation is made by a licensed valuer, the seller will not sell it to another buyer, the practice is to deposit a certain amount as a guarantee.
Market valuation
The market valuation of a property is a mandatory aspect when making a purchase. When it comes to buying through a mortgage, the appraisal of the home’s condition is key to the bank being secured by a lower sales price. When preparing the appraisal in this case, the purpose should be stated – to serve as collateral to the specific bank that is lending the loan.
The main characteristics that will be taken into account to form the valuation are its location, the type of construction and its functionality.
Of course, its location carries the most weight, and the more developed and well-infrastructured the area in which it is located, the higher it should be. In the case of the type of construction, new construction has a higher price, given that it should be of higher quality, durable over time and meet current criteria.
Functionality corresponds to the extent to which the rooms in the space are distributed – the more optimal it is, the higher its valuation.
The important thing is not to worry on your way to getting a mortgage, our experts will be right by your side throughout this process that sometimes feels like wandering through a maze.
In part two, you can learn about the remaining steps to completing the transaction via deed transfer.
