How do you know if you are making a good real estate investment?
November 29th, 2021 |
We live in a very complex moment in the real estate market in which it is necessary to know it well to be able to make the ideal real estate investment. After the COVID-19 pandemic that has had the whole world paralyzed during the past year, it is in this 2021 when the real estate market has begun to green and investors are moving their capital again.
It is important that you carefully analyze the existing offer to make a smart real estate investment. At Homewatch we have a wide assortment of housing development offers that are unbeatable for your investments.
In this article we are going to tell you how to find the right home to make a good real estate investment, adapted to your budget and your possibilities. Pay attention and look carefully for your home, you will find offers that you will not be able to miss.
What is the budget for a good real estate investment?
The first step when choosing a real estate investment is to determine the budget for the sale of the property. If you have the full sum of money, this step is simplified, but in Spain the vast majority of transactions, four out of every five homes, are financed through mortgages.
Banks do not recommend, or allow, borrowing more than 35% of the income of buyers, the owner or owners of the future home, although there are some financial entities that reach 40%. This is an important and fundamental piece of information when looking for the right home, as we must always do so according to our possibilities.
As a general rule when applying for a mortgage, the bank finances you up to 80% of the purchase price of the same. Therefore, in our search for housing, we have to take into account the money we have saved in order to calculate our budget. We must have the remaining 20% of the cost of the property plus the expenses generated by the sale transaction, which is usually around 10% of the value of the property. These expenses include the purchase taxes, the notary’s office necessary for all the paperwork, etc.
There are some financial entities that finance 100% of the sale value of a property. They usually do it when the property belongs to them. Currently, banks have a large number of properties in their portfolio, and they often offer greater facilities for buyers in order to get rid of them. This option will be very important to take into account if we see that our savings do not reach that 20% of the home we are looking for.
As we can see, there are several factors that influence our budget to see what our ideal real estate investment is. It is important to take them all into account and search according to the maneuvering possibilities that we have.
What type of mortgage are you going to choose?
Another important issue when making a smart real estate investment is choosing the right type of mortgage for our characteristics. We are going to see and analyze the different types of mortgages that exist and thus we can better determine which one adapts more fluidly to our needs.
In this type of mortgage, a fixed interest is established that covers the entire duration of the mortgage loan. Due to this fixed interest, without variations during the useful life of the loan, this type of fixed mortgage is assumed to be safer for the user, since they are aware of the installment that they will have to pay for the duration of the loan, from the beginning to the end. Against them they have to be more expensive than the other mortgage typologies that they offer us.
Variable mortgages owe their name to the fact that the interest fluctuates throughout the life of the mortgage loan. A benchmark index is used to establish interest, usually the Euribor. This index changes according to the situation of the European economic system.
The interest will be reviewed periodically by the bank and will be balanced according to the trend of the benchmark. These mortgages are somewhat cheaper, but there is a danger that the index will skyrocket if the Euribor does, with which they pose a greater risk than fixed mortgages.
Mixed mortgages are a mix between the two types of mortgages that we have seen before, fixed mortgages and variable mortgages. They generally act like fixed mortgages at the beginning, for the first decade or so, and go on to act like variable mortgages for the rest of the life of the mortgage loan.
It is not always easy to develop an adequate strategy of real state investments for our capital, so it is important that you put yourself in the hands of professionals in the real state sector. At Homewatch we have the best professionals ready to help you succeed in your investments. On our website you can find a multitude of real estate offers among which you can find the right home for your needs and thus be able to make your ideal real estate investment. Do not hesitate to contact us, and together we can make your investment capital shine.
Article by Vanesa Mena, Nov 29, 2021