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Such are the different repayment terms of a mortgage

Posted by Michel B. on 09/09/2019

The most durable loan of our lives is surely the mortgage we hire to buy our home. The reason, the repayment term, name with which we refer to the period of time established with the entity for the return of the money.

Although according to the National Statistics Institute (INE) the average term of mortgages that constitute housing is 24 years, this can be extended … Up to 40 years.

There is no ideal repayment term, as this has to be chosen based on our needs and what best suits us. Another factor that can determine the term is the type of mortgage, variable or fixed.

Variable Mortgages

In variable mortgages, the most common repayment term is 30 years but, punctually, it can be extended up to 40 years. Therefore, it is an advantage for those who need to pay reduced fees. However, the longer the term is extended, the more interest must be paid over the years.

In this class of mortgages, clients may be exposed to increases (also decreases) in the installments depending on the evolution of the reference rate.

Fixed mortgages

An attraction of fixed-rate mortgages is knowing that the interest rate will not vary, if a change in the bonuses is not made, throughout the life of the loan. What supposes a tranquility at the time of paying the quotas since these will be constant.

In this case, the possibility of deadlines is extended and can be 10, 20 and up to 30 years. Depending on the term, interest is established. The longer, higher.

Early repayment

It is possible that at some point you can advance part of the debt, that is, make early repayment. And this may be partial or total. The first refers to the repayment of a part of the mortgage while the second one returns the amount that remains to be paid on the loan.

With the entry of the new Mortgage Law, effective since last June, there have been changes in commissions for early repayment.

In variable interest mortgages, commissions are limited to 0.25% during the first three years and 0.15% during the first five years. In fixed interest mortgages, there is a cap of 2% during the first ten years and 1.5% for the rest of the years.

Now you know all the repayment terms depending on the type of mortgage, fixed or variable. If you have thought about hiring one, keep that in mind. Because the duration of your relationship will be linked all that time.

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