Argentina mortgage key points
Ten key points to keep in mind when acquiring mortgage credit
Everyone dreams of the day they will be able to stop renting, and begin putting their money into something they own. But in today’s market, with constantly rising property prices and few financing options, this dream seems more and more out of reach.
However, there are still a few financing options, provided by both the private and public banking sectors. Some of these options make more sense than others, however, and it is important to choose the one that is best for you and your situation. Here are ten important factors to remember when choosing a mortgage provider.
Repayment options
Argentina uses the French system for repayment, in which each payment is an equal amount, part of which goes to pay the interest, and part of which goes to the capital amount. Each month, the proportion changes based on a financial calculation that depends on the interest rate. In the beginning, most of your payment amount will go towards the interest, but towards the end, you are mostly paying the capital. There are many other payment systems in the world, but the above is the sole system used in Argentina.
Fixed rates
It is not best to borrow with a fixed rate, just for the sake of having a fixed rate, if the interest rate is high (such as today’s 18 or 20 percent). Today, this price may be attractive, below the price hike, and because of the high inflation, but in ten years, the average level should be lower, making it not so smart over the long term. It’s difficult to say exactly what this average should be, but is should be about 30% less than the current rates. However, for those who need to buy and don’t have the cash, there may not be other options offered in the today’s market.
Variable rates
Variable interest rates are dangerous because they depend on factors that the debtor cannot control, especially in a volatile country like Argentina. The life of the mortgage, however, may see large variations, or not. If so, though, the risk is even greater because of the stakes: the home itself. And if the variations are too extreme, it can have a massive impact on the borrower, which is what caused the recent international crisis.
Annual rate vs. total cost
The total cost includes, in addition to the rates, the other costs, such as life and fire insurance, and other commissions. It is important to consider the total financial cost when applying for a mortgage.
Other variables
Other variable that should be considered when taking out a mortgage include insurance, especially life insurance, which is often expensive, and weighs a lot in the payments. In terms of the repayment period, with high rates like today, extending the period does nothing in terms of lowering the payments. Ten years is a reasonable repayment period today; with lower rates, 20 years or more makes more sense.
Early repayment
Most companies have penalties for early repayment, at least during the first years, as mortgages are great business for banks. You need to look at each program’s individual rules on this subject, as it just depends on the individual situation, and how much the penalty is.
Salary-payment ratio
Banks will stress the salary-payment ratio to ensure that the borrower truly can repay their loan without too much stress or unforeseen hardship.
Independent contracting income
Depending on the bank, you may be able to add any monotributista, or independent contracting, income to your salary to secure a better rate. Ask your bank for further details.
Timeline
The average time for securing a mortgage is about 45 days. Determining tax rates, researching the borrowers financial information, and other such questions takes time.
Securing the property
Making a reserva ad referendum with the current owner of the property you intend to purchase secures the property for you while your loan is being processed.
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