REAL ESTATE – MARBELLA WOHNEN – FINANCING – What house can I buy with my income?
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What house can I buy with my income?
When buying a home, it is important to analyze the maximum financing that can be requested when applying for a mortgage. With this information, it will be easier to specify the installment that can be paid without compromising our personal finances. Factors such as previous savings, monthly income and whether we have other active debts are key elements to objectively know what house I can buy with my salary.
What are the questions to ask before buying a home?
These are some of the fundamental questions that must be asked before buying and applying for a mortgage for a home:
- How much money do I need to have saved to be able to buy a house?
Banks usually grant mortgages with an amount of up to 80% of the purchase price of the property or the appraisal value (whichever is lower). This means that it is necessary to have saved around 20% before applying for the loan. This percentage rises to around 30%-35% if you take into account that the purchase process always involves a series of expenses associated with the sale, including taxes.
- How much can I allocate to my mortgage according to my monthly income?
Experts recommend that the percentage of household debt does not exceed 30% of monthly income. This means that in a family in which the spouses earn together 4,000 euros per month, the mortgage payment they must pay should not exceed 1,200 euros.
- Can I have a mortgage if I have other debts?
In addition to income, the bank also takes into account whether you have other current debts, such as a car loan. This type of cost is added to the borrowing capacity, conditioning the mortgage that you can access.
Taking these three fundamental aspects into account, it is possible to carry out a mortgage simulation and discover how much you could pay, approximately, in each monthly payment.
- What are the costs associated with buying a home?
The main costs associated with buying a home for the buyer amount to between 10% and 15% of the total price. These include:
- Property Registry, notary, mortgage opening fee (if applicable) and agency.
- Taxes:
- For new homes: Value added tax (VAT), which is 10% throughout Spain, except in the Canary Islands, where the Canary Islands general indirect tax (IGIC) of 6.5% is paid. In addition, this type of property is taxed by the tax on documented legal acts (AJD), which depends on the region where the house is located and ranges between 0.5% and 1.5%.
- For second-hand housing: Property transfer tax (ITP), which usually ranges between 6% and 10% (although it may bear a lower rate) and also depends on the autonomous community in which the property is located.
- What type of mortgage is best for me based on my income?
The level of income is a key factor in choosing the type of mortgage that best suits me. Depending on the interest rate, there are three types of mortgages:
Fixed mortgage. Once the interest rate on a fixed mortgage is agreed with the bank, it will not vary, so the installment paid will always be the same. This type of mortgage may be suitable if you want to avoid variations in your monthly expenses and what you are looking for is both financial stability and peace of mind.
Variable mortgage. In a variable mortgage, the interest rate is updated from time to time, according to what has been agreed in the contract. If you are a person with a certain tolerance for risk, this may be the mortgage for you, especially if you believe that in the long term the Euribor, the reference index for most of these mortgage loans, may fall.
Mixed mortgage. This mortgage is like a hybrid between fixed and variable mortgages, since during the first years it has a fixed interest rate and, later, it changes to a variable interest rate.
When buying a home, it is important to analyze the maximum financing that can be requested when applying for a mortgage.
When buying a home, it is important to analyze the maximum financing that can be requested when applying for a mortgage.
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