Mortgages in short

A mortgage is the longest financial commitment most people ever make. You do not need to become an expert — but it is worth understanding the five or six ideas that decide how much you pay in total.

How much you can borrow

The bank looks at three things: your stable income, the debt you already carry, and the down payment you bring.

Only a share of your net monthly income can go towards instalments — this is the debt-to-income limit, and it is capped by regulation. Existing credit cards and loans are subtracted too, even if you do not use them. An unused but open credit card can reduce the amount you are approved for.

The down payment is the part you pay from your own money. The larger it is, the less you borrow, the less interest you pay, and the stronger your negotiating position.

The interest rate: fixed, variable or mixed

• A variable rate is usually a market index plus a fixed bank margin. Your instalment rises and falls with the index.
• A fixed rate stays the same for an agreed period (a few years, sometimes the whole term). You typically pay a little more at the start in exchange for predictability.
• A mixed option combines a fixed period followed by a variable one.

Do not compare offers on the headline rate alone. Look at the annual percentage rate, which includes fees, and at the total amount payable over the full term. Two loans with the same nominal rate can differ noticeably in final cost.

Costs beyond the instalment

Around a mortgage you will meet: a file analysis fee, the property appraisal, mandatory home insurance, sometimes life insurance, the mortgage registration fees and the notary's fee. Ask every bank for the complete list, in writing.

Government-backed programmes

Romania has had state-guaranteed programmes for first-home buyers, with a smaller down payment and price caps. The conditions, the caps and even the existence of such programmes change from year to year, so check the current situation on official sources and with your bank before you count on one.

The steps of the file

1. Pre-assessment. You bring an income statement and your debt situation; you get an indicative amount.
2. Approval in principle. A document stating how much you are eligible to borrow, usually valid for a few weeks. With it in hand, you negotiate far more credibly.
3. You find the property and sign the pre-contract, with deadlines realistic for the bank.
4. The appraisal, carried out by a valuer the bank accepts.
5. Final approval and preparation of the loan agreement.
6. Signing at the notary, where both the sale and the mortgage are signed; the bank transfers the money to the seller.
7. Registration of your ownership and of the bank's mortgage in the land register.

Between step 2 and step 7 several weeks usually pass. Keep that in mind when you agree the deadline in the pre-contract.

Three common mistakes

• Buying at the very limit of the debt-to-income cap. An instalment that fits "exactly" becomes heavy at the first unexpected expense.
• Forgetting the running costs of the home. Maintenance, property tax and insurance do not disappear once you have the loan.
• Not comparing. The difference between the first offer and the third can add up to a considerable sum over the life of the loan.

Before you sign

Read the loan agreement in full, including the sections on early repayment and on what happens if you miss an instalment. Ask about everything you do not understand — a good adviser answers without rushing you.

Interest rates, regulations and support programmes change often. The above is general information; for current figures, ask your bank and check official sources. This guide is not financial advice.

Want to know what the home you are considering is worth? Try the free valuation or browse the listings.