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Although the Government approved a set of measures to mitigate the effects of interest rate hikes until the end of 2023, there are other solutions that can help families combat this increase.
Doctor Finance shares four ways to stop the impact:
1. Change the interest rate: fixed rate and mixed rate
Bear in mind that you can change the interest rate to a fixed or mixed rate. In the case of the fixed rate, the home loan contract is not subject to the rise and fall of interest. The rate applied is the same until the end of the contract. However, it should be noted that a fixed rate is always higher compared to a variable rate, at least at the beginning of the contract.
On the other hand, a credit with a mixed rate makes it possible to fix the TAN in the initial period of the contract (for the agreed period). In this way, credit holders can benefit from a more stable period at the beginning of the contract, after which they are subject to Euribor fluctuations. In Portugal, when holders initially opt for a mortgage with a mixed rate, the most common fixed periods are 5, 10 and 15 years. At the moment, with rising interest rates, there are more and more banks applying smaller fixed periods, such as 1 or 2 years. As a rule, these fixed periods of shorter duration are associated with promotional campaigns with very low interest rates. Outside these campaigns, it is possible to find mixed rates with fixed periods of 5 years at, for example, 4.2%, or 10 years at 4.6%. The ideal would be to compare the TAN practiced in various entities, calculate the additional amount you have to pay for subscribing to other products and see if, in the end, this proposal pays off.
2. Transfer housing credit
Transferring a mortgage loan to another entity can be advantageous, even if the contract’s interest rate does not change and the Euribor continues to rise. As a general rule, when you want to transfer your home loan to another bank, this bank is willing to offer better conditions to attract a new customer.
However, this step should never be taken without first analyzing several proposals. This is the only way to ensure that you benefit from the best conditions. In terms of cost reduction, transferring home loans allows, as a rule: to reduce the spread; reduce the amount of mandatory credit insurance, stipulate new conditions, remove products that we had associated with the previous contract, change the maturity of the contract more easily, and even have a new valuation of the property that enhances the value of the house. In some cases, the new contractual conditions can generate more attractive long-term savings.
3. Apply for multipurpose credit
Another possibility is to resort to a mortgage reinforcement through a multipurpose loan, if the LTV (ratio between the amount the bank lends to buy your home and the value of it) allows it. In this way, housing credit can help settle one or more loans taken out. Thus, it is possible to curb the impact of rising interest rates, since, with that additional amount, it is possible to completely settle the debt of a credit card or even a car loan. A multipurpose loan has different conditions compared to a home loan. As a rule, apply spreads slightly higher.
4. Opt for credit consolidation
Finally, to curb the impact of rising interest rates, there is the possibility of consolidating all consumer credits. Consolidated credit can include a personal loan, car loan, credit cards and other types of consumer credit. Credit consolidation is a financial solution that allows you to merge several credits into one. As, as a rule, a lower rate is applied compared to other credits, we are able to obtain a single monthly installment cheaper. There are those who manage to save up to 60% of the total amount of their monthly fees. With this savings, you can pay off your home loan. For this type of financing, you cannot be in default on any of the credits.
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