At the moment when we decide to take a mortgage and finance the purchase of real estate with its help, there are often questions about its costs.
There is no denying that each loan is associated with additional costs that must be borne by interest, commission, etc. Before signing the loan agreement, it is worth checking carefully what the total cost of the loan is. See what comes with the cost of the mortgage.
What determines the cost of the mortgage?
Each of us knows that a mortgage is a commitment that accompanies us for many years. Most often, we decide on loans that have to be repaid by a minimum of 20 years and it is no surprise to anyone that real estate is largely financed with funds obtained in this way.
If you want to be sure that you have chosen the best mortgage offer, then you must carefully read the terms of the contract and analyze the total cost, which includes:
The interest rate is the main factor that affects the total cost of the loan. It includes an interest rate that is not influenced by the bank or us and cannot be negotiated.
The amount of such a rate is determined by the Central Bank and is called WIBOR. As WIBOR increases, the loan installment increases. The loan interest rate is also a margin, which is fixed. It is influenced by many factors, including currency, amount of commission and own contribution, as well as scoring.
The commission is a fee for the bank for granting the loan. Banks earn a lot from it and the cost of the mortgage depends on it. The commission can be from 0 to even 5% of the total value of the loan and it all depends on the amount determined by the bank.
The amount of commission can be negotiated and it is included in the monthly cost of the loan, therefore it will be practically imperceptible to the portfolio.
When choosing a loan offer, you should also pay attention to the additional costs charged to the loan. This may, inter alia, be compulsory to take out life insurance. Taking a mortgage we can be practically sure that we will have to take out such insurance.
In this way, banks hedge themselves against circumstances that could result in the borrower’s inability to pay back the debt. During the loan period, many unforeseen situations can happen, which is why it is most understandable but creates additional costs. Additional costs may also be low own contribution insurance or bridge insurance.