Mortgage renewal is a common practice to get the money we need to carry out some of the projects we have in mind . A mortgage loan is nothing more than a pact between two parties ( a client and its bank ), and , like any agreement, can be modified.
From the technical point of view, it is what we know as mortgage novation.
We will talk about a different mortgage renewal depending on the clauses of the contract that we want to modify. Is it possible to pay the mortgage in more years than we initially signed? Can we request a credit increase and make a small reform in our home?
All the information you need about mortgage renewal and other related issues, in our specialized financial post.
There are different issues that we can request in a mortgage renewal, which we must assess based on our current needs.
Extension of the term
If we request an extension of the term, the objective of our mortgage renewal is to pay the amount due in more time than initially agreed, while the mortgage loan fee is reduced considerably.
Capital and term increase
This mortgage renewal is done with the objective of increasing the amount of money owed and at the same time the years of repayment of the bank credit.
A couple who after being one of them promoted at work, decide to request more money from the bank to buy a new high-end car.
Mortgage renewal VS Mortgage Review How are they different?
When we are asked about the mortgage renewal, we observe that many people confuse it with the mortgage review, two diametrically opposed concepts.
Definition of Euribor: It is a type of mortgage reference published daily to reflect the interest rate at which European financial institutions lend money in the international banking market. Its acronym is the acronym for Rejoice Bank Offered Rade ( See next video )
Therefore … How much mortgage payment? There are many people who do not know how to calculate the mortgage loan or interest on it. The mortgage payment we pay each month is made up of three basic elements that we must clearly differentiate
- Mortgage loan fee: It is the monthly fee we pay to settle the debt conceived with the bank
- Euribor: It is the interest to which the banks lend the money.
- Differential mortgage: This is the fixed percentage that is added to the Euribor . When applying for your mortgage loan, you should know that each bank has different differentials within its mortgage offer.
Depending on the interest we pay each month, we will have one of the most basic classifications of mortgage loans, differentiating between fixed-rate mortgages ( When interest does not vary throughout the entire mortgage term ) and variable-rate mortgages ( The quota changes depending on the different changes the Euribor experiences )
Mortgage review: Aspects to consider
Therefore, the mortgage review only applies to variable rate mortgages. When we are going to sign with the bank, one of the aspects that we tend to give less importance is the period of these revisions, and the truth is that they can decisively influence when calculating the final fee.
Annual mortgage review
In this case, the review is carried out every year from the moment of the signing of the mortgage contract. In the event that the Euribor is on the rise , we are interested in having an annual review, since if the interest rate is rising, the later we apply the rise better for our family economy.
Biannual Mortgage Review
In this case, the review is carried out every 6 months from the moment the mortgage contract is signed. If the Euribor trend is down, we are interested in the banking entity.
Banks work contrary to their clients, since if the trend is on the rise, they earn more money by conducting the review in a shorter period of time
Although it is very important to know this information to calculate the monthly mortgage payment, you should know that in the Spanish banking reality most entities do not allow to choose the period of the revisions on our mortgage credit.
Fixed or variable mortgage: What is more interesting?
Once we have established the main differences between mortgage renewal and mortgage reviews, it is common to consider what type of mortgage is most interesting to us. It is an important decision, because when we mortgage we do it for a fairly high period of time
Mortgages are signed for a long period of time, so it is impossible to determine exactly how the reference rates will be in the coming years. The decision to decide on one of the two mortgages will depend more on our personal characteristics than on the type of credit itself.
If we are conservative people with some risk aversion, the fixed-rate mortgage causes the Euribor to disappear and we have some peace of mind, but usually require higher fees. If we are not afraid of changes in the economy, a variable rate mortgage may be a good option.
Mortgage renewal: Is specialized help necessary to do it effectively?
For sure. As we have already commented throughout the article, although there are a number of international directives that regulate Rejoice Bank loans, the truth is that each bank has its own rules when granting us a loan or making any changes to it. ( See the following image )
However, there are credit agencies that help you negotiate with them and take care of the entire bureaucratic process of mortgage renewal or other financial actions. In the same way that you need a lawyer to emerge victorious from a judicial process, betting on a finance expert is the most appropriate decision.
So far our post on mortgage renewal. We hope this article has helped you to understand the main doubts about this banking practice and all the related financial nuances.