With the increase in Euribor rates and inflation in recent times, families are feeling a greater need to consider their expenses well, as well as to guarantee the disposable income to cover expenses. This often leads to make cuts, above all so as not to miss the monthly installment of your home loan. So, if you are going through a tight financial situation, know that there are some ways to minimize the impact of these increases. In this article, we gathered some alternatives to make the expenses, particularly those related to your home.
Renegotiate and/or consolidate your credits
If you are currently experiencing difficulties in dealing with all the expenses associated with your home, consider renegotiate your credit. There are several alternatives to reduce your effort rate. First, you can ask for extend the payment term of your home loan. In addition to the deadline, you can also negotiate with your bank to reduce the APR (global effective annual rate), namely through the definitive (or temporary) removal of some products that, in general, allow to reduce the spread. But beware, this step can also increase the total cost of the loan. On the other hand, you can also ask the bank to assign you a capital grace period, in order to make up for their financial difficulties. This means that, during this period, you only pay the interest associated with the housing loan, with no repayment of the borrowed capital. Although, in the long term, you pay more for your credit, this solution gives you “leeway” to avoid defaulting. banks, particularly on the effort rate, the opening to start a renegotiation or the suspension of charging of amortization fees. Consolidate your credits it is also one of the options to reduce the costs related to your housing. Once again, you will end up paying more in the long term, with the advantage of having a more affordable installment each month. Still, keep in mind that, in order to consolidate your credits, you need to meet certain criteria. For example, if you are already in default situation, you cannot resort to this solution. If you are unemployed or have a precarious job, it also has a negative weight when the bank decides whether or not to approve the consolidation of your loans. Also read: Euribor rise: is it the right time to amortize your home loan?
Evaluate other housing credit options on the market
Even if you have the option to renegotiate your home loan with your bank, it may not be the one that offers you the best conditions. For this reason, you should not fail to analyze the offers of other banking institutions and consider the credit transfer, and you can do it yourself or, given the complexity of the process, ask for help from a credit intermediary. When analyzing the best offers on the market, there are several factors that you should take into account, namely: the amount charged to the consumer (MTIC), the APR of the loan, the spread and the products that you must necessarily take out and insurance, whether life or multi-risk. There are other factors to consider, but these are relevant and easy to “master” when making comparisons. Read also: Renegotiate housing credit: 5 situations in which you should do it
If considerably reducing your expenses can help you to face the difficulties, having one more source of income can also give you more “leeway”. Even if it’s a part-time with little workload (for example, only working on Saturdays) it can make all the difference on a monthly basis. If you are looking for something related to your area of expertise, you can find extra work faster, as you already have skills that the market values. For example, suppose you can find a part-time job, where you earn €200 every month. In a scenario where you have a mortgage loan of €150,000 for 30 years, and the Euribor rate shoots up by around 2.5%, with this extra €200 you can already face the increase in Euribor. An amount that apparently “just makes up” the salary in times of economic growth, in a tight situation and high interest rates can make a difference between being able to pay the installment to the bank or going into default. Read also: What is the spread of your home loan? There are banks offering 0.85%
Review contracts associated with your housing
In addition to housing credit, you must also review the contracts related to the general expenses of your home. This includes supply contracts for power, internet, phone, between others. There are several options on the market, so don’t be afraid to change. In addition to renegotiating your current contracts, you should also consider whether there are any services or subscriptions that you don’t need, or simply don’t use. Removing subscriptions to streaming services, music, specific television channels, among others, can save you tens or hundreds of euros per month. By saving this money, you can use it to contribute to your emergency fund and thus be more comfortable financially. Also read: How to prepare for interest rate hikes on home loans?
“Excessively” high insurance premiums
Especially when taking out a home loan, it is suggested that you take out certain life and multi-risk insurance policies. This information can be analyzed in the FINE (European Standardized Information Sheet).These insurances may not bring great advantages, but they will certainly help to reduce the spread. Therefore, you must assess whether the annual value of insurance outside the banking institution compensates in relation to that proposed by the bank. In certain cases, the out-of-bank life insurance premium (with better coverage) may still be cheaper than the life insurance proposed by the bankwith minimal coverage. Also read: Should I switch to a fixed rate home loan?