The mortgage loan is the product that allows you to have the necessary amount to buy or rehabilitate a home or other property.
Loan providers require a guarantee before granting a loan. In the case of mortgages, the owner of the loan puts a guarantee (mortgage) on the property itself, which will be transferred to the financial institution in the event of default. In addition to this mortgage guarantee you offer, as in a personal loan, your personal guarantee. Click here for payday loan manchester.
The features of mortgage loan
The real guarantee of the mortgaged property gives greater security to the operation, which implies less risk for the financial institution. For this reason, and for the high amounts that are requested to buy a house, the terms for their return are longer and the interest rates, lower than those of personal loans. Both elements characterize mainly mortgage loans. Visit this site for payday loan manchester.
A mortgage loan must be associated with a book or operating account in the name of the borrowers. That is, you must have an open account in which the amount of the loan will be paid and the payment of the monthly installments will be charged.
Due to the long duration and economic value of the loan, contracting a mortgage is one of the most important financial transactions for a family or individual.
Modalities of mortgage loans
The interest rate is the price that entities charge for lending their money. Banks can grant mortgage loans at a fixed, variable or mixed interest rate.
Fixed interest rate
The interest rate and therefore the monthly payment to be paid remain fixed throughout the life of the loan. The advantage of this method is that you will know in advance how much you will have to pay each month, without worrying about the rate increases and decreases. As an inconvenience, at the time of contracting, a higher rate is usually established than for variable-rate mortgages. The allowed repayment terms are also shorter; A maximum of 20 years is usually fixed.
Variable interest rate
The variable interest rate is reviewed annually or semi-annually (sometimes quarterly) and is adjusted to the market conditions at that time, according to a reference index, such as the Euribor * (for example, euribor + 2.1). The advantage of this method is that at the time of contracting, the initial interest rate is usually lower than that of mortgages at a fixed rate and the option of longer repayment terms is usually offered, usually between 20 and 30 years or even more. With a variable interest rate, one runs the risk of having to pay a larger fee if the interest goes up, although it can benefit if it goes down.
There are different financial instruments that allow covering the risk of rate hikes. This means that, if the rates go up, the bank will pay the customer the difference between what they have to pay and a certain monthly fee. However, these products have their own risks: if the rates go down, the customer will have to pay the bank, and sometimes these amounts can be very high.
Mixed interest rate
In this case, a fixed interest is charged during an initial period (usually between three and five years) which then becomes a variable interest rate. It could raise or lower the fee to pay depending on the evolution of the interest rate of the reference used.