When you have to borrow money for a home, you can either borrow the entire amount in the bank, but you can also make a combination of bank and mortgage loans.
But what is the best solution? We give you the answer here.
New opportunity at the bank
It is a relatively new approach that you now have the opportunity to mortgage your home 100% through a bank loan. Previously, it was only possible to borrow 20% through the bank, with the remaining 80% having to be financed through a mortgage.
With full financing through the bank, in some cases it is possible to get a lower interest rate than you can through a mortgage, but there are still some pitfalls you need to be aware of by taking a full bank loan.
What is the difference between mortgage and bank loans?
While it may sound convenient to have your entire home loan all in one place, there are a number of things to consider before going out and borrowing for the dream home.
If you sign a loan agreement with the bank, they have the option to terminate this agreement if your financial situation changes. If you lose your job one day or become incapacitated for an extended period of time, the bank has the option to terminate the agreement.
With a loan through a mortgage institution, they do not have the same opportunity to terminate the agreement. If payment is made on time and the property is not forged, the agreement cannot be terminated.
Fixed and variable interest rates
As with so many other types of loans, there is the option of having either a fixed or variable interest rate.
The variable interest rate will usually be lower than the fixed rate, but there is also a greater uncertainty associated with this. This is because it follows the market interest rate, and by increasing it will also cause your home loan to rise in monthly payments. Therefore, make it clear to yourself about how much you can afford to pay if you choose a variable interest rate.
With a fixed interest rate, you are guaranteed a fixed expense without fluctuations.
A mortgage loan financed through the bank will most often have a variable interest rate, while the loan through a mortgage institution has a fixed interest rate.
With a fixed-rate loan, you will also have the opportunity to have your home value protected. If the interest rate rises, the price of the loan will fall, and you will therefore be able to repay the debt on the home cheaper.
What conditions should you consider?
Whether you choose financing through bank or mortgage, there are a number of issues to consider before signing a loan agreement.
The price of the loan
The most important thing when it comes to taking out a loan is how much it actually costs. You find this out by looking at the APR, which is the annual percentage cost. This covers expenses such as interest, benefit, creation costs and monthly fees. This will show you how much the loan will cost you.
The interest rate is not always the number you should look for, as other numbers may also affect the price of the loan.
The term of the loan
How long you have to pay back the loan must fit your wishes. Do you prefer to settle the loan quickly, or do you want more leeway in your finances and repay it over a longer period?
Restructuring the loan
It is not free to reschedule your home loan, so you need to investigate how you can earn those costs by rescheduling the loan.
Consider whether there is the option of repaying the loan ahead of time and what it will cost, as it is not free to repay your home loan ahead of time. With a convertible mortgage, you can repay your loan ahead of time, with a notice agreed in advance. If it is not convertible, you should buy all the bonds in the loan at the market price instead.
Therefore, this is an important factor to consider before taking out a bank or mortgage loan.