There is one thing you should be very clear about regarding mortgages. No financial institution can force you to take out one of its financial products in order to obtain a mortgage, not even home insurance.
What they can do, and in fact most of them do, is reward you if you add insurance, your salary or other products to your mortgage loan. This is what is known as a subsidized mortgage. Still not familiar with the term? Now you will understand how they work and when they may be of interest to you.
What is a subsidized mortgage?
What defines subsidized mortgages is that the interest rate you pay is linked to the products you add and that “reduce” points in the interest of the loan. In other words, if you add certain products you will get a lower interest rate.
A very common example is taking out home insurance . If you take out the insurance offered by the bank, instead of paying 3% for your mortgage, you will pay, for example, 2.5%.
Among the most common subsidized products are direct deposit of payroll with the entity, mortgage insurance , which would be home, life and payment protection insurance, and investment products such as funds, pension plans or cards.
These products may vary depending on the financial institution and not all of them offer the same bonuses or improve the loan with all of them. What does not change in any case is that with a subsidized mortgage you exchange a greater connection with the institution for a lower interest rate on your mortgage.
This rate boost will remain as long as you do the same with the products that give the bonus. As soon as you stop using them, you will lose the boost they gave you.
How do you know if your mortgage has been discounted?
Finding out if you are being offered a discounted mortgage is very simple. The loan contract must explicitly and clearly state which products are discounted and what advantage they provide. It's that simple.
If you want to find out whether or not the loan you already have is subsidised because you want to change insurance or transfer your salary to another entity, you should also review the contract you signed. In mortgages prior to 2019, it is possible that linked products are mentioned instead of subsidised ones.
In any case, these specific products must be included in the loan. If after reading the contract you have any questions, you can contact the bank directly and ask.
The golden rule to know if the bonus is worth it
The advantage of subsidized mortgages is that you pay less interest and thus save money each year and on the mortgage as a whole. That is why if you are wondering whether a subsidized or non-subsidized mortgage is better, the way to find out is to compare what you save on one side versus what you pay on the other.
To help you understand this better, let's look at a concrete example. Imagine that a financial institution offers you a 0.25 point improvement in your mortgage for taking out payment protection insurance with them and that you know that you want to take out the policy, either with the bank or on your own.
To know if it is worth adding the policy to the mortgage, the first thing is to find out how much you are going to save that year, something you can do using a mortgage simulator , which will tell you how much you pay per year in interest with that 0.25 more and less.
Afterwards, you will only have to look for a similar insurance policy on the free market and compare that price to the cost of the company's subsidized insurance plus the savings in interest. This way, you will be clear about whether that bonus represents a real saving or not.
Mortgages beyond the bonus
Subsidised mortgages are just one option. There are also mortgages on the market without subsidies , such as those from Hipotecas.com, to which you can include, if you wish, the insurance you need.