Therefore, the main difference between wanting something mortgage loan and personal loan usually purpose. The sole purpose of a mortgage loan is to purchase a property or land to be built. And personal credit status can be used to purchase any consumer product, including buying a home. “Buying a house on a consumer loan may seem unbelievable to us, as interest rates are higher in Spain and financial institutions do not pay as much as needed to buy a house.”Says Simone Colombelli, manager of iAhorro Mortgages.
Of course, claiming a personal loan can be profitable, but “depending on the cost of the house,” adds the mortgage comparator’s spokesperson, who also explains that this is because “the interest rate on the consumer loan is higher because between 5% and 8% compared to the 2% or 3% for which fixed mortgages currently prevail.”. However, Colombelli concedes that “costs are lower with a personal loan because the only fixed cost the user will have to pay when claiming will be notary intervention, the fee being 0.3% of the money required”. Of course, depending on the bank, an opening commission of 2% or an early cancellation commission of 0.5% to 1% should be added if there is a debt before maturity.
Another great advantage is that you will save time and the explanations required to the bank to give you this loan are minimal. “When processing a personal loan, the documents required by institutions will be faster as they are very simple: salary, employment contract and personal data. Detailed information about the goods to be acquired is not requested. However, when it comes to mortgage loans, a more comprehensive analysis of the client’s risk is done”, underlines the Mortgage manager at iAhorro.
Mortgage allows you to pay lower installments over a longer period of time
Again, “The most common is that mortgage financing is much cheaper than financing through personal loan”, Banco Mediolanum’s Marketing Manager, Alessio Zambón, reassures him, “This is the situation where, frankly, the collection guarantee for the financial institution in case of non-payment is very different.” Also, the bank decides what kind of interest to offer each user based on their profile: job stability, monthly salary, equity or guarantee are just some of the factors to consider.
According to Alessio Zambón, “the mortgage allows you to have higher amounts and longer terms as well as much more convenient monthly installments, Compared to personal loans in a shorter term” and in the event of default, “the mortgage loan provides a guarantee for the business (home), so the risk to the lender is lower,” says Marketing Manager Banco Mediolanum. therefore, the holder must address this through their current and future assets,” he adds.
However, requesting a consumer loan to buy a home would be better for the client “in cases where they are faced with a temporary need for liquidity, i.e. if they plan to sell a home with this will reduce contractual debts in a short time,” adds Zambón.
Personal loan for houses under 100,000 Euros
They explain it with an example from iAhorro to see it more clearly. If 50,000 Euros is needed to buy a house (which is the minimum amount that banks set for issuing a mortgage), if they offer us a consumer loan with a TIN of 7.09% with a repayment term of 8 years, 20-year maturity, 1%, to repay the debt. It might be more interesting than a fixed mortgage with a 78 interest rate. Why? Why? In the case of consumer loans, we will pay 66,806.90 euros, with mortgage the total cost will increase to 69,645.68 euros. In addition to interest, this cost includes 2% average opening commission (if any) and 0.3% notary fee in case of general purpose loan, 10% management fee in case of mortgage.
Starting from the previous example, we must also take into account the monthly installments. A monthly payment of 683.93 euros would have to be paid on the loan, while only 269.36 euros would have to be paid on the mortgage. Therefore, the choice is also affected by the user’s ability to pay and the risk of being in debt. The limit set by the Bank of Spain for housing allocation is between 30% and 35% of the monthly net salary, so if this condition is met, there will be no problem in the bank requesting a personal loan in case of non-compliance. He would deny the operation without hesitation.
Therefore, the director of iAhorro Mortgages states, “A home between 30,000 and 100,000 euros is below the national mortgage loan average (according to the INE, it was 146,445 euros in July) and may be a good option if you want a personal loan,” adds Colombelli of course. : “The decision should be made according to the payment and indebtedness capacity of the borrower and after comparison.”