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The mortgage system and amortization schedules

22.09.2022 14:19 h.

Updated: 09.22.2022 2:19 p.m.

A mortgage It is a long-term loan. It is granted by a bank, in most cases, to pay for a home, although we can also find other alternatives such as a mortgage loan.

When your application is approved, the property becomes the property of the client, although the guarantee for non-payment is the home itself, so that breach of contract means the loss of it.

Factors to consider

When selecting a mortgage correctly, different variables must be assessed. Some of the most important are:

  • Capital: The sum of money that the client requests from a bank to buy the house.
  • Term: Period of time in which the contract will remain in force and, therefore, the payment obligations.
  • Interest: Additional fee that the bank charges the customer for offering said financial service.
  • type of mortgage: Depending on the interest rate, we can find three fundamental variants: Fixed, variable and mixed mortgages.

amount to pay

The monthly fee it becomes one of the main objects of uncertainty for customers. This is made up of a portion of the borrowed money and that must be returned -that is, the amortized capital- plus those additional expenses that derive from the contracting in concept of interests.

When we meet before variable and mixed mortgages, the monthly fees are reviewed periodically. Generally, the updates are carried out every six months or annually according to the fluctuations experienced by the Euribor. The formalization of the operation requires the elevation of the mortgage to a public deed and its corresponding incorporation in the Land Registry.

Amortization table

One of the most important components of the mortgage system From the customer’s point of view it is amortization table. It is a table in which all the monthly installments that will make up the mortgage loan are collected, what part of each of them will be used for the amortization of capital or what part for associated interest.

The distribution of each part varies depending on the type of amortization. The french system is the most widespread. From it, the payment of constant installments is made while the life of the loan is extended. However, when we talk about variable rate mortgages, increases or decreases in interest rates will be registered.

legal regulations

Mortgage contracting processes are regulated by the Law of Real Estate Credit Contractsin force since June 16, 2019. In general terms, we could say that its implementation has generated changes in two fundamental lines.

The text establishes the obligation for banking entities to offer their financial products in a context of greater legibility and transparency. Nowadays, applicants receive a greater volume of information before formalizing the contract. In addition, the LCCI also implies greater prudence on the part of banks when analyzing the viability of applications. For example, banking entities currently assume a higher risk in the case of approval because in the event of non-payment, an embargo cannot be carried out immediately. In this sense, those clients who present a more delicate profile tend to encounter greater obstacles than in the past.

Most of the articles of the LCCI are not retroactive.which means that they do not apply to those mortgage loans that were contracted before the moment of their entry into force, that is, on June 16, 2019.

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