Mortgages are great allies when providing liquidity for the purchase of a home, which makes them a very valuable option to energize and grow the real estate market and the real estate sector. But it is a solution that involves risks and also makes the property more expensive, since the interests associated with the mortgage loan must be taken into consideration.
Therefore, a solution for the holders of this type of real estate credit is to opt for the Early repayments of the home mortgage, an alternative that has its pros and cons. Therefore, it is important to know and analyze the key factors to take into full consideration when choosing to reduce mortgage debt through amortization.
Early repayment of a home mortgage
Every time a mortgage holder pays their monthly rent, they are in effect making a scheduled amortization of the mortgage loan, this mechanism will last until the loan is paid in full. But there is also early repayment, which consists of advancing part or all of the debtwith the intention of reducing the debt or completely canceling the credit.
Early repayment of the home mortgage can be partial or total
When the amortization is partial, the debt continues to be maintained, but with a smaller amount, which represents for practical purposes that Each month the debtor will pay a lower mortgage payment. Of course, maintaining the planned amortization period for said credit, or failing that, a reduction in the number of years of the debt.
The optimal time to repay a home mortgage
Deciding when to repay the mortgage is another matter of interest, but the experts’ recommendation is to do it when the debtor has a significant amount of money saved (which you won’t need). Or failing that, the mortgage holder has an extraordinary income that was not calculated in the budget and planning (an inheritance or a prize).
It is crucial to analyze the best time to pay off the home mortgage
Amortize the mortgage, at the beginning or at the end?
The Spanish mortgage sector is governed by the French amortization system, this means that during the first years a higher percentage of interest will be paid, while towards the end of the loan, the higher proportion will be related to the capital. Which simply indicates that the sooner the early repayment of the mortgage is developed, the better it will be, because in the long run less interest will be paid.
Amortize the mortgage before or after the installment review?
When you decide to carry out early repayment of the mortgage, you must recognize the importance that variable and mixed mortgages have their installments reviewed on a semi-annual or annual basis. Experts finding that there is no pattern that indicates that It is neither better nor worse to amortize the mortgage before or after said review of the mortgage payment.
But it is relevant to recognize that if it is amortized before the review of the mortgage payment, a smaller payment will be paid each month, but with the mitigating factor of amortizing less capital. Now, when the amortization is made after the review of the mortgage payment, A larger installment will be paid, but a larger capital will be amortized..
The owner can decide between amortizing, saving or investing the money saved
The dilemma of amortizing, saving or investing
Verifying if there are other alternatives for the money that will be used in the amortization is a matter of utmost importance, since it is possible invest this money and generate a return that is greater than the interest on the mortgage. But remembering that there will always be the real possibility that the money will be reduced, due to the natural risks that accompany any investment of money.
Remember that early repayment should also be seen as an efficient way to save, since it is possible to reduce the installments, the duration of the loan and therefore the payment of interest. Simply, the mortgage holder will have to analyze in detail whether this amortization is worth it, but becoming decapitalized and losing the ability to economically maneuver in the event of any unforeseen event.
2024-01-24 10:00:34
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