Thinking about buying a house via mortgage is thinking in long terms, and that is that in addition to the years that the debt will doubt, it will be accompanied by an interest payment to be able to enjoy your own equity.
The confinement that caused the coronavirus may have made you think of a home with larger spaces to be able to work from home without affecting your family.
Now, is it a good time to take out a mortgage loan? Bernardo Silva, CEO of the mortgage fintech Yave.mx, and José Luis Vásquez, an academic at the Universidad Iberoamericana (Ibero), told Expansión that yes, it is a good time to do it, but as long as the following conditions are met :
1. Interest rate : never before have interest rates been so low, 8% on average for the sector, and it is expected that towards the end of this year or the beginning of 2022 they will begin their upward trend.
2. Prices: after the increases in recent years, the pandemic caused the market to slow down.
In the housing in Mexico that oscillates in the 5 million pesos (mp) or more, no price increases are expected, a situation contrary to that which is worth less than 1.5 million pesos, warns Bernardo Silva.
The cost of housing is higher if it is located in a central or urban area.
3. Promotions: many developers, seeing that the market was losing dynamism, applied promotions to be able to move (sell) the inventory, but it seems that these are here to stay.
“The mortgage market in 2020 suffered a 7% contraction in terms of the number of loans granted,” said José Luis Vásquez, while the average amount of loans fell 6.5%.
The total amount of financing placement, including Infonavit, FOVISSSTE, in 2020 was 161,100 million pesos, while in 2019 it was 367,600 million pesos, according to Infonavit’s 2020 annual housing report.
During this pandemic, real estate companies have begun to include more spaces for people to work or study from home. On the side of buyers, who can carry out their activities remotely, they have started looking for real estate outside of Mexico City.
In the event that people are already going to return to the office, Vásquez recommended, it is possible to consider a home with a higher cost, since what was spent on gasoline or transportation, meals away from home, among other expenses that will no longer be made , there would be the possibility of improving credit.
When is not a good time?
1. Volatility in income: It is necessary to be honest about the ability to pay so as not to put the equity at risk, so if income is usually volatile or unstable, a moment of crisis and uncertainty is not a good time to acquire a debt that will be paid in 10, 15 or more years.
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2. Rentals: the fact that there are good rental opportunities can also make this a better option than opting for credit.
eye! One of the main recommendations of the experts consulted is to be careful of an intermediary who requests the payment of a commission. The best thing is to go directly with the banks, construction companies or with Infonavit and FOVISSSTE. “Anything that includes two or three hands in the financing process, I would say better not take risks,” said José Luis Vásquez, an academic at Ibero.
How to compare to choose the best option?
Before signing a contract, it is very important to resolve and clarify all the doubts that may arise, since there are considerable amounts that are being discussed and people’s assets are involved.
“The best thing you can do if you have doubts is to go to a lawyer, it is better to pay a consultancy to explain the credit conditions to do something risky,” said José Luis Vásquez.
The first points that have to be reviewed are the interest, the term, the amount of the monthly payments and if there is a penalty for advance payments . However, there are other elements that are part of the famous total annual cost (TAC) to which you have to pay attention to avoid surprises.
“What you have to tie up are the base conditions of your credit; input the rate (of interest), the term; see that there are not very high penalties in the case of prepayments. You have to establish the prepayment criteria, what is going to affect you; if it is the amount, your monthly payment will go down but the number of monthly payments does not change; if it is term, you stay with the same monthly payment but the number of monthly payments decreases, “explained the Ibero academic.
It is important to know if a fixed or variable rate will be applied, as well as if the monthly payments will be fixed or increasing -each year the amount of the payment increases-, as well as having the amortization table to know not only what you are going to pay, but also how much will go to the payment of interest and how much to capital.
Ideally, there should be no penalty for early payments or settlement.
Infonavit, FOVISSSTE, as well as banks and financial institutions move in a range of interest rates, which go from around 8% to 12%. It is convenient for you to apply to several institutions, I recommend two or three, so that you already have the real rate that you are going to end up paying, ”recommended Bernardo Silva, who added that Yave.mx rates range from 7.9 to 10%.
The issue of insurance is also important, not only because of what they cover, but because of the additional cost that they will represent. Although the coverage is similar, the cost may vary from institution to institution.
The most common insurance is damage, life or disability and, in some institutions, unemployment insurance.
You have to take into account the commissions and the appraisal or research expenses on the property, which it costs the client. In the case of commissions, there are two: the commission for opening – one-time payment – which can range from 0% to 1.5%; and a recurring one – it has different names – that will be charged throughout the life of the loan.
When comparing two or more products, it is important to carry out this exercise between credits that have the same conditions, that is, not to buy a fixed interest rate with a variable or fixed monthly payments with an increasing one.
It is important to remember that now, with mortgage portability, it is possible to obtain savings and better conditions when taking a loan from one institution to another, said the CEO of Yave.mx.
