Repayment of the amount due is usually made by debiting a current account in monthly installments, although the contract may provide for a different periodicity.
Mortgages intended for private users are usually designed for the purchase or renovation of a home, so much so that they are typically referred to as ” home mortgages “.
Banks offer a wide variety of options on the credit market, and if you’re considering a mortgage for your first home, it’s a good idea to understand the various options available. Unless you’re an expert, it’s also helpful to understand how mortgages work, as they represent a significant financial commitment that will impact your family budget for a number of years. Below are some explanations.
The various types of mortgages
A private individual who intends to purchase their first home has the possibility to choose between different types of mortgage .
The most common is the fixed-rate mortgage , which means the interest rate remains unchanged for the entire term of the contract, meaning the payment will always be the same. This option protects against potential rate increases, but it doesn’t allow you to benefit from potential rate reductions.
Then there are variable-rate mortgages , which are divided into a standard type and a fixed-rate type . In the first case, the installment is influenced by market price increases or decreases: if the rate drops, the installment will be lower, otherwise it will be more expensive. In the second case, the interest rate is affected by market fluctuations, but the installment will not change; instead, the term of the mortgage will, decreasing or extending.
Then there are mixed rate mortgages , which can be divided into two types: multiswitch and variable fixed rate .
In the first case, the mortgage starts with a variable rate, but with the option to purchase some switch options, which allow you to change the rate depending on market trends. Thus, the more options you purchase, the greater your chances of changing the rate.
In the second case, a fixed-rate period is provided for the length of time desired by the customer, after which the rate becomes variable. However, there is a one-time option to return to the fixed rate again.
It is worth remembering that by purchasing a highly energy-efficient home (class A or B) you can take advantage of the green home mortgage , which allows you to save on some mortgage costs.
Which mortgage should I choose?
Specific advice cannot be given because markets are never static : given that we’re talking about long-term financing, it’s impossible to make predictions. It’s best to seek advice from the bank’s advisors, considering that, as previously explained, there are mixed forms that allow for varying interest rates.
The mortgage simulator
To get an idea of the financial commitment you’re taking on, you can use the online simulator offered by banks. Keep in mind that, with rare exceptions, the maximum amount granted never exceeds 80% of the property’s value.
The simulators are simple to use: enter the amount of capital you wish to apply for, select the mortgage term, and within seconds you’ll be able to view all the details of the various options: fixed rate, variable rate, and any other options. You can try several options until you find the solution that best suits your repayment capabilities.
It is important to check the APR , the Annual Percentage Rate , which takes into account not only interest, but also almost all other costs related to the mortgage: it indicates the actual cost of the mortgage in percentage terms and is very useful for comparing the various offers.
The necessary documentation
The documentation required to apply for a mortgage is quite extensive: the lender will require various personal documents, income documentation, and property documentation.
Much of the paperwork can be completed online, but the mortgage contract must be signed in the presence of a notary. Before signing, however, the bank must conduct all necessary checks. Once the contract is signed, the bank will quickly disburse the requested capital.
