The mortgage is the contract that is signed to obtain bank financing when we buy a home , with the peculiarity that the loan guarantee is the property itself,which also remains in the hands of the debtor while paying the debt, but if he stops paying, The creditor can sell the house.
Is the mortgage the same as the mortgage loan?
In the common language, we usually talk about mortgage or mortgage loan when referring to the loan that is requested for the purchase of a home. We use both terms indistinctly as if they were equal, but in reality they are different .
The mortgage is a real right of guarantee that ensures that the debtor will pay to the creditor the loan granted for the purchase of the house , because if he does not pay the debt, the creditor has the right to request the sale of the property .
The advantage that the mortgage has for the debtor or buyer is that the home that acts as collateral is his property, he can sell it or rent it , even if he is mortgaged, while he fulfills his obligations, that is, while paying the loan.
The mortgage , being a real right that falls on the house, must be registered in the Land Registry . When the house is joined to the mortgage, it is necessary to cancel it when a mortgaged home is purchased and also when the mortgage loan ends .
The mortgage loan, on the other hand, is the loan of money that the financial institution makes to the buyer to acquire the home , money that has to be repaid in a determined period and for which he must pay some interest. The guarantee that ensures the return of the loan is the mortgage constituted on the home, while the mortgage loan is the debt.
What elements should a mortgage contract have?
The mortgage is composed of three main elements:
It is the amount of money that the bank lends to the buyer to acquire the house. Generally, the limit that banks finance is set at 80% of the appraised value of the home, which is usually lower than the sale price.
It is the percentage that the debtor must pay the bank for the borrowed capital. The interest paid can be fixed, which does not change during the term of the mortgage; or variable, which changes according to the evolution of the reference index when it is revised throughout the year. In both cases, the quotas are constant, but if the interest is variable, the quotas will change each revision period.
It is the time established for the return of the borrowed money plus interest . In the case of mortgages, they are usually long periods because the amount of the mortgage loan is also high. It is good to know that the longer the repayment term, the lower the fees will be but the interest will grow more.
What types of mortgages are there?
You can list different types of mortgages according to the type of interest, the type of fee, the type of real estate or the target audience to which they are directed. If we focus on the interest rate , which is perhaps the most used criterion, they differ:
Mortgages at a fixed rate
The quotas do not vary during the entire duration of the mortgage, they are stable, they are not affected by the rises and falls of the Euribor , which is the main reference index of mortgages. In return, the interest rate is higher and the repayment term is shorter than in variable interest mortgages. The commissions for partial and total amortization are also higher, so canceling the mortgage in advance is more expensive.
Variable rate mortgages
The odds are constant but vary depending on the type of interest when the revision applies, it occurs that is generally EURIBOR. If the interest rate goes down, the quotas will also be reduced, but if it rises they will become more expensive. In their favor, they have that the amortization periods are broaderthan in the fixed interest, reaching 40 years and the commissions are also lower than in the other mortgages. The majority of mortgages that are signed in Spain are of variable interest.
Mortgages of mixed type
They combine a fixed interest rate , in which the quotas are stable, generally in the first months of the amortization period, and a variable interest rate , in which the quotas vary according to the evolution of the reference index.
It is convenient to study the offers well before signing a mortgage because having such a long repayment period the expenses can be very different in one or the other type.