Talking about the money required to buy a house is much more than talking about the sales price. On the one hand, it is essential to have some savings. On the other hand, you have to consider what the mortgage interest adds up to. Thirdly, any real estate purchase and sale operation involves expenses.
Key aspects to calculate the money needed to buy a house
In many cases, purchasing a home means going into debt for years. It is fundamental to do the math and consider many elements to avoid drowning in debt.
Financial cushion
If you are going to apply for a mortgage, you should know that banks do not usually finance more than 80% of the value. Therefore, there is no choice but to have savings to cover the remaining 20%. The amount needed will depend on the house price.
It is advisable to save an amount similar to what will be paid monthly for the mortgage. In this way, the savings will be high, the money necessary to buy a house will be available sooner, and we'll get the habit of putting away that quantity.
Expenses associated with the sale
It is another key element. The reason is that these expenses can add up to between 10% and 12% of the value of the operation. If they are added to the 20% that banks do not finance, you must have saved at least 35% of the cost of the home. What are those expenses?
• Those derived from the notary.
• Taxes: VAT and Tax on Documented Legal Acts in new construction or Property Transfer Tax if it is second-hand.
• Property registration.
• Management expenses if hired someone to handle all the procedures.
• Real estate commission, if applicable.
Mortgage loan
It is always advisable to save as much money as possible to reduce the mortgage. We must not forget that the price of money changes and that a rise in interest rates can raise the fee significantly.
Besides, the lower the mortgage, the lower the interest we'll pay.
How should we calculate the maximum monthly amount we can pay? The advice is that the monthly payments do not represent more than 35% of the monthly net income of the family unit. For instance, the mortgage payment should not exceed €700 when our net income is 2,000 euros.
And if it is cash, what will be the money needed to buy a house?
The cash purchase avoids the expenses associated with signing the mortgage. However, you'll need a higher amount than the home price. The reason is that you will have to face those other expenses associated with the sale: notary, taxes, etc.
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