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Mortgage Rates For All Ages

21st March 2011: Algarve Property News

Age is a key factor when applying for a mortgage, as it determines not only the mortgage loan conditions the bank offers you, but also the factors to be taken into account when deciding which offer to accept. Each age group has its own needs, advantages, and drawbacks. Here is the advice from a specialist financial portal which examines what they are for each group, and the best approach to take:

For those in their 20s:

The drawbacks:

- Lack of savings. At this age you have not been working for very long, and this makes it difficult to save a 20% deposit, which means that you may need a 100% mortgage loan.

- Job insecurity. Those in their 20´s usually have more precarious jobs, which means that a mortgage which suits your needs should include flexible repayments, such as instalment deferrals, interest-only payments during the first months etc.

The advantages:

- You can choose the young p person's mortgages offered by the banks and the government.

- You can choose the mortgage repayment period that best suits you, up to 50 years in some banks. This will depend on whether you prefer paying lower monthly instalments, although this implies paying more interest overall, or whether you would rather pay off the mortgage as quickly as possible.

- The bank may ask you to take out home and life insurance policies on signing the mortgage, but it is unlikely to require you to take out a pension plan at this age.

A tip: A mortgage is a long-term commitment, and at this age you don't know whether you might want to change banks in the future. Before signing, try to negotiate a mortgage assumption fee and an early redemption fee of 0%, as this will make changing banks easier and cheaper if you ever decide to do so.

For those in their 30s

The drawbacks:

- The young person's mortgages offered by the banks and the government are only avail able to under 35s. - It is more difficult to obtain 100% financing (unless you have an outstanding customer profile and you can find a mortgage online, or you buy a bank-owned home). This means you can only apply for a mortgage if you have already saved a 20% deposit.

The advantages:

- Unless you have changed banks frequently, by now you will have built up a relationship with the bank which will make it much easier for you to obtain and negotiate a mortgage since, for example, your bank knows that your earnings are regular and reliable.

- If the bank requires you to take out unemployment insurance or a pension plan before granting the mortgage, it may well be that you no longer view these products as unnecessary expenses and have even thought about contracting them on your own account. In this case you should study the special treatment mortgages that offer lower interest rates depending on the number of bank products that you take out.

You can still choose the mortgage repayment period that suits you best. This may be up to 40 years as most banks have established the maximum age of customers at the end of the mortgage term as 70 years of age.

A tip: This age is the golden age for consumers which means it is also the best time to play to your strengths (high and/or stable salary, good promotion prospects, exemplary credit history etc), and use your good relationship with the bank to try and negotiate the best possible mortgage. As this is the type of customer that all the banks want to have, it will also be easier to obtain discounts if you know how to ''play the banks off against each other.''

For those in their 40

The drawbacks:

- If you are 45, you will find it difficult to get a mortgage repayment period of over 20 years, which means that the instalments may be higher than you expected. This factor will significantly affect your price range since it must be remembered that the instalment s should never account for more than 35% of your earnings.

- The bank will require you to take out lots of related products, such as life and unemployment insurance, a pension plan etc, which they assure you will be well worth your while. However, they will also significantly add to the mortgage costs.

The advantages:

- At this age you are more likely to have taken out life insurance, a pension plan etc in another bank. In this case you will not have to take out new products in the new bank in order to get the mortgage. Instead, you simply need to transfer the policies to the bank which has given you the mortgage.

- Generally speaking, by the time you reach 40 your earnings have become more stable. You know by experience what your income is and the bank is familiar with your pattern of earnings, which means that you can feel more secure and there is less room for surprises.

A tip: Save as much as you can in order to ask for as small a mortgage as possible from the bank. The smaller the ''favour'' that you ask the bank, the cheaper it will be. The aim is for you to have paid off the mortgage in full by the time you retire.

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