All the information about Mortgages
What are Mortgages
Mortgages is a Loan through which a person or Legal Entity known as Lender , leaves money to another natural or legal person ( borrower ) for a certain amount known as capital in exchange for receiving the amount loaned plus the interest established in a determined period of time and providing a property as collateral that can be a home, premises, farms, lots, offices, etc.
When contracting a mortgage, follow the advice offered by the Bank of United States in the Client Portal section dedicated to mortgages where it guides you from the first steps to contract, the life of the loan and how to cancel the debt and remove it from the Property Registry once canceled
Interest Rate Mortgages
According to the chosen interest rate, mortgages are classified into 3 classes:
Fixed rate mortgages:
As its word indicates, the interest rate agreed on the mortgage loan is fixed for the entire life of the Loan . That is, if, for example, we agree to an interest rate of 2% Fixed for a mortgage of 100,000 us dollars to be paid in 30 years, the resulting installment will be 369.61 us dollars and this will be the amount forever except for modifications in deed agreed by both parties.
By contracting the mortgage at a fixed rate , the resulting installment at the beginning of the Loan is usually more expensive than if we contract at a variable rate. However, we make sure that the bill to be paid each month will not rise until the apartment is fully paid.
Variable Rate Mortgages
The mortgages contracted at a variable interest rate are those whose interest rate changes from time to time based on the market price. The fee review is usually done every 6 months or a year.
In order to determine the interest rate that is applied in each period , a mortgage reference index is chosen that is officially published so that it is perfectly known and accepted by both parties.
The most widely used and therefore the best known benchmark is the Euribor for one-year term operations, published monthly by the Bank of United States.
To this reference index or Euribor is added a differential agreed with the bank that is usually between 1 and two points. Depending on the market situation, there have been lower spreads such as Euribor + 0.50 and others higher than 2 points.
Mixed Type Mortgages
Another interest rate alternative is to diversify the risk by contracting the interest rate with a mix between fixed and variable . That is, you can ask the bank for an initial period at a fixed rate, for example 5 or 10 years and the rest until maturity at a variable rate.
It may not be a very good option, given that the risk of rising interest rates can occur in the long term with greater probability than in the first years, so we would be assuming the payment of a higher installment compared to the rate. variable.
The way to calculate the interest rate when the mortgage is in the variable rate period would be the same as we have indicated in the variable mortgage.
Important: Ask the Bank to inform you of the Interest Rate calculating the APR (includes all expenses) and you will avoid surprises
It is known as Multicurrency Mortgage that which is contracted in foreign currencies other than our own, in our case the Euribor. The most commonly used currencies in these cases are the Japanese Yens or the Swiss Franc.
Although these types of mortgages are not currently contracted, when the Euribor was at interest rates around 5% and the yen was at 1%, the wide difference had the attraction that it resulted in a considerably lower quota. However, there is a high risk when the value of currencies change.
In fact, there were many affected in the years 2.008 and 2.009 who opted for this type of financing and were "hooked" by the evolution of the Yen at which time the capital they owed was much higher than the initial one and even the value of the house.
Mortgage classes according to destination
There are several types of mortgage depending on the destination of the funds:
Mortgage Buy Home or local
It is the most common type of mortgage, when a mortgage loan is requested for the purchase of an apartment , premises or a warehouse. The amount that the bank usually finances depends on the type of property that is acquired and the solvency of the buyer or applicant for the mortgage. For the purchase of a habitual residence, up to 80% of the appraised value or the purchase amount is financed. If it is a second home or vacation, the maximum percentage of financing goes down.
To finance the purchase of premises, warehouses , plots and other real estate to be mortgaged, the maximum percentage to be financed is greatly reduced and 60% is common practice.
Mortgage To Refinance
If the destination of the money from the mortgage loan is not the purchase of the home, the demands of the financial institution are greater. If, for example, we have the need to refinance other debts from several banks and unify them in a single loan and installment to pay, the bank will request a mortgage guarantee to be able to be on a property free of charges and in these cases it is most likely not to be willing to grant more than 60% of the value of the property and especially in those cases in which the owner is in the RAI and Credit Checker defaulter registries.
Mortgage to the Promoter
It is known as a Promoter Mortgage when the amount financed is dedicated to the construction of the home itself.
The operation of this type of mortgages is different from the mortgage to the buyer since in these cases, the financial institution authorizes a loan limit but does not deliver all the money on the spot. As the different phases of the house or apartment building are being built, the bank delivers the corresponding amount against work certifications issued by the appraiser architect.
Once the work is finished, the total amount of the mortgage is adjusted and a payment schedule and the interest rate are established, although it is normal that it is previously established in the developer loan deed.
When the Promoter mortgage has been signed by a construction company, at the end of the work a horizontal division deed is signed and the part of the mortgage corresponding to each property is assigned. From this moment, the buyer can choose to subrogate in the same mortgage or look for the loan in another bank and even pay in cash by paying off the part of the mortgage signed by the builder.
Another less known type of mortgage is the Reverse Mortgage or Reverse Loan . These types of operations are regulated by Law of (November 2.007) BOE 294 of December 8, Law 41 / 2.007.
The reverse mortgage is designed for retired people over 65 who have a home that they own free of charges but do not have enough liquidity to meet their needs or pay for residences.
The owners of the house mortgage it and receive a monthly rent based on the value of the apartment, which can be a monthly amount with a specific maturity or a life annuity.
This product has not been very successful given that the monthly amount received is very low compared to the value of the property since the entity grants a Soldotna percentage of financing and the interest generated by the financing must be included.
Upon the death of the owners, the heirs can choose to pay the mortgage and take ownership of the home or desist from inheriting said property.
Before signing a mortgage, demand the Binding Offer in advance to analyze its content
Mortgage Simulator for Calculating the Installment
Before visiting a bank to apply for a Mortgage Loan , it is convenient to be well informed and one of the most important aspects is to know how much we would pay for the mortgage and what maximum amount we can get to buy the home.
To this end, we provide you with our mortgage calculator similar to the one used by all banks and savings banks using the so-called French system.
It is very easy to use, you only have to enter the amount you need, the estimated interest rate that the bank will charge us and the term in years that we will return the capital plus interest.
The system shows you the installment or bill to pay each month with information on how much corresponds to amortized capital and how much interest is paid. It also obtains an amortization table with details of all the installments and the outstanding balance that remains after each amortization.
Access our Mortgage Simulator at this Link: Mortgage Loan Simulator if, for example, you want to know how much would be paid for a mortgage of 120,000 us dollars or any other amount.
The expenses and taxes necessary to contract a mortgage are among others: What the Notary charges, Expenses for registering the mortgage in the Property Registry, appraisal expenses to assess how much the apartment is worth and the Tax on Documented Legal Acts.
Currently, as of March 2.019, according to the last approved Mortgage Law, the mortgage expenses are all borne by the bank except for the appraisal expenses that are borne by the applicant. However, some entities have chosen to also assume the appraisal expenses as a marketing campaign and in order to avoid subsequent claims on said expense.
However, the claim for mortgage expenses signed previously is still in litigation and for this reason there are thousands of lawsuits filed in the courts to try to have the mortgage expenses paid at the time. That is, the expenses of the notary, property registration, agency, appraisal and other miscellaneous are borne by the bank retroactively.
Mortgage Novation and Subrogation
In which cases is a mortgage novation made and when a mortgage subrogation is requested:
What is a mortgage novation
It is called a mortgage novation when a modification of the signed mortgage loan is contracted without changing banks. For example lower the interest rate, or increase the amount of the mortgage.
What is Mortgage Subrogation
It is known as mortgage subrogation in two different cases, when the bank mortgage is changed, generally to improve conditions or when we take over the existing mortgage when buying an apartment. It can be the purchase from the builder or an individual.