How to choose a mortgage and not overpay the bank

The total cost of credit (TCC) is a figure that includes all loan-related payments: interest, fees, insurance, mandatory payments to third parties. By law banks must disclose it in the contract. Compare banks by TCC — the difference with the headline rate can be 2–5 percentage points.

Ask each bank for the full payment schedule (the amortisation schedule). Add all the payments over the entire term and subtract the loan amount. That is your real overpayment. On a USD 60,000 loan at 12% over 15 years the overpayment is about USD 65,000 — you give the bank more than the flat cost.

Some banks charge a one-off fee on disbursement: 0.5–2% of the loan amount. A '10% rate with no fee' is often better than '9% rate with a 1% fee'. Count the total cost, not the advertised number.

The rate does not change for the entire term, even if the central bank rate rises. You know exactly what the monthly payment will be — that makes budgeting easier for years ahead. A fixed rate is usually slightly higher than a variable one at the moment of issue: you pay a 'premium for certainty'.

A variable rate is tied to an interbank benchmark plus the bank's fixed margin. If the central bank rate rises by 3%, your payment can rise by 15–25%. Only take a variable rate if you understand the risk and have enough income headroom to absorb it.

Several banks offer a rate fixed for the first 3–5 years and variable thereafter. It can look attractive, but it is precisely in the first years that most of the payment is interest, and if the rate rises later refinancing may be uneconomic.

Insurance of the secured asset (the flat itself) against physical damage is a lawful bank requirement on a mortgage. The cost is about 0.1–0.3% of the flat's value per year. You are entitled to choose the insurer yourself: you do not have to take the bank's affiliated provider, which is often more expensive.

The bank may not impose life insurance as mandatory, but without it the rate is often 0.5–2% higher. Do the maths: if the rate difference saves more than the cost of the policy, taking insurance is the more economic choice.

Insurance against job loss, extended legal packages — often sold as a load to the loan. Read what is actually covered. If the payout conditions are harsh or the cover symbolic, decline.

Some banks ban early repayment in the first 6–12 months or charge a penalty. Ask about this before signing. Early repayment even in small amounts cuts the overpayment disproportionately on a long-term loan.

On a partial early repayment the bank usually offers two options: shorten the term (keeping the same payment) or reduce the monthly payment (keeping the same term). Shortening the term saves significantly more on interest. Reducing the payment is better if your income is unstable.