Having a good business relationship with banks and knowing the forms of interest offered by the financial market are some of the recommendations that experts advise for choosing the least risky interest rate to invest in real estate.
An important aspect that must be considered when you want to invest in real estate is the interest rate. An indicator is expressed as a percentage and used to estimate the cost of a loan or the profitability of savings or investments.
For real estate to be a good deal, the challenge for investors is always to obtain a low-interest rate. The best rate is the lowest we can get for a given transaction. Here’s how to choose the best financing for your home.
The Best Decision
One of the tips to get a good interest rate will always be to maintain a good business relationship with several financial institutions. And then, as in any business, be listed in several of them. To make a good decision, you must inform yourself and answer the following questions:
1. What Should be Considered for a Suitable Interest Rate?
Carlos Aguirre, director of the School of Construction and Research of the Space Production Center of the University of the Americas (UDLA), maintains that “the most important thing in the case of a loan is the relationship between the interest rate, the annual income for rent (considering the vacancy) and the value of the property.
In this sense, the interest rate, and even more so, the short-term payment of the foot, are key to making a good investment”.
2. How Many Interest Rates are Available?
The main interest rates that can be found are interest rates for consumer loans, commercial loans and companies, and interest rates for mortgage loans.
3. What are the Riskiest Interest Rates?
Interest rates for consumer loans are riskier than commercial and mortgage loans. This is how Romero explains it, who maintains that: “This occurs because the amounts of consumer loans are lower, and therefore, banks charge a higher interest rate to cover their transaction costs.
On the other hand, a commercial loan, which involves much higher amounts, the interest rate is rather low, and the cheapest interest rate is for mortgage loans because when a family or company commits to a loan of this type, the real estate is guaranteed in the name of the bank. Therefore it has less risk for the financial institution”.
4. Fixed or Variable?
The interest rate can be fixed, which means that it remains stable. At the same time, the investment lasts, or the loan is repaid, or variable, which is generally updated monthly to adjust to inflation, exchange rate fluctuations, and other factors. “All interest rates are in UF because they are long-term loans”.
Therefore, the best thing for a family is to buy at a fixed rate because it is less risky. Generally, the variable rate is offered as an alternative to pay a lower loan amount, but this will increase depending on market conditions”, explains Romero.
5. What Should I Request for the Credit?
If, after quoting, you decide on a bank, then you should ask for an amortization table. This document will allow you to know the behavior of your debt month by month since it specifies the payment periods, the installment, the interests, etc.
What is a Mortgage Loan?
The mortgage loan is a financial product through which a financial institution lends us money based on a real guarantee: our property (home, garage, storage room, local, solar, etc.). In the event of non-payment, the entity may require us to pay the money owed through a judicial procedure and, in the last case, may keep our home as a whole or partial part of the debt collection.
The Characteristics of Mortgage Loans are:
- There is a property.
- A public deed must be made that must be registered in the Property Registry.
- It is a medium-long-term loan (generally between 15 and 30 years)
- There are several types of mortgage loans according to the interest rate (fixed, variable, or mixed), the type of fee we pay, or the type of currency in which the loan is paid (normal or foreign currency).
- The conditions of the mortgage will vary depending on the entity where we request the loan and also taking into account the purpose of the loan (acquisition of our habitual residence, purchase of a second residence, improvement of “subrogation” conditions, reunification of debts-consolidation, etc. )
- To terminate the mortgage, it is not enough that the entire loan has been repaid, but it must be recorded in the Registry since if the mortgage is not made, it will continue to appear “alive.” For this, the borrower must bear the bank’s consent to the cancellation and the expenses.
Here are a few ways to be financially prepared to buy your first home.
