7 criteria that define what the best home loan is for you

Choosing the best home loan is not always simple. There are several offers in the market, each with specific conditions, different rates, and requirements that vary from person to person.
Therefore, the “best” does not mean the same for everyone. What is advantageous for one client may not be suitable for another. It all depends on technical and personal criteria that influence the cost of credit and financial stability over the years.

In this article, we explain what these criteria are and show how to evaluate each one, without falling for offers that seem attractive but hide relevant costs.

What does it mean to have the “best home loan”?

The best home loan is not necessarily the cheapest at first glance. It is also not the loan with the lowest monthly payment. It is the one that fits your financial profile, your income, your preferred term, the level of risk you want to take on, and your stability over the years.

Thus, before comparing banks, it is important to understand what elements shape the real cost of financing. There are, in total, 7 criteria to evaluate, which are divided into 4 technical criteria and 3 personal criteria.

4 Technical criteria to identify the best home loan

1) APR: the indicator that shows the overall cost of credit

The APR aggregates interest, commissions, taxes, and insurance costs. It is one of the most useful indicators because it shows the total cost of credit in a single value. A lower APR tends to reflect more favorable conditions, but it should always be analyzed together with the other criteria.

2) Spread: the bank’s margin that affects the monthly payment

The spread is the margin that the bank adds to the reference rate (Euribor). The lower the spread, the lower the payment will be. However, this value depends on the risk profile, the effort rate, and other elements that vary among clients.

3) Total Cost of Credit: how much you pay in total for the home loan

The Total Cost of Credit shows the total amount to be paid over the entire contract. It includes interest and charges and allows for clear comparisons of loans. The best home loan is the one with a balanced Total Cost of Credit in relation to the contractual conditions.

4) Type of rate: fixed, variable, or mixed

The choice of rate can significantly alter the evolution of the payment.

• Fixed rate: maintains the same value throughout the term.
• Variable rate: follows the fluctuations of the Euribor.
• Mixed rate: combines an initial fixed period with a subsequent variable period.

The ideal rate depends on your level of comfort with possible fluctuations.

3 Personal criteria that influence the best home loan

5) Effort rate: balance between income and charges

The effort rate should not exceed the limits recommended by the Bank of Portugal. A balanced effort rate increases the likelihood of approval and improves the conditions proposed by the bank.

6) Loan term: impact on the payment and total cost

Long terms reduce the monthly payment but increase the overall cost. Short terms reduce the total cost but require greater financial capacity.

The best term is the one that ensures a balance between monthly comfort and financial responsibility.

7) Financial stability and individual profile

Age, employment status, banking history, savings, and other loans influence the conditions offered. Even with the same amount and term, two clients may receive different proposals due to their profiles.

The “best home loan” is not the same for everyone; your profile matters

Each bank assesses risk differently. Therefore, two people with similar incomes may receive different proposals. The “best” always depends on the balance between technical and personal criteria.
It is important to compare offers from various institutions and analyze costs in the medium and long term, not just the immediate payment.

Beware of home loan offers with hidden costs

Some home loan proposals include conditions that seem advantageous but may involve additional costs not considered upfront. Therefore, you should analyze the values for:

Mandatory insurance

Life and multi-risk insurance can vary in price between banks. A loan with a good spread may not compensate if the insurance costs are very high.

Conditional bonuses

Some banks reduce the spread if you purchase additional products. These bonuses may lose validity if you fail to meet any requirement.

Costs associated with contracting

Commissions, evaluations, and registrations can influence the final cost. It is important to analyze these values before making your decision.

The importance of independent analysis to choose the best home loan

Comparing proposals alone can be difficult. Each bank presents different conditions, and reading the proposals requires attention to detail.
A credit intermediary, such as Visão Financeira, analyzes your profile, compares offers, and clarifies the differences between each proposal. The process is independent and has no costs for you, as the remuneration is ensured by the banks.

How to proceed to find the best home loan

In summary, the best home loan is the one that fits your profile, your budget, and how you want to manage the future. Relying on independent analysis helps to understand the differences between proposals, identify hidden costs, and avoid hasty decisions.

If you want to evaluate what the best home loan is for your case, you can seek support from Visão Financeira to receive a comparative analysis and make a more secure decision.