The mortgage has become a very common financial product and refers to a real right of guarantee that is constituted to ensure the fulfillment of an obligation, which confers to its holder a right of realization of value of an asset that remains in the possession of its owner. It is likely that we will face interest on a mortgage throughout our lives and knowing how to calculate them will become a necessity. Here we will show you the different types of mortgages that exist and how to how to calculate their interest using formulas, taking into account all the factors that can be determinant in the process.
Having resources will help you to choose the mortgage that best suits you, and it is important to visit previously what conditions accept and interests you will have to pay, as well as to know which part is destined to amortize the mortgage and which is dedicated to paying the mortgage interest.
How to calculate interest on a fixed mortgage?
The term fixed is used to define that the interest payable on this mortgage is continuous over time. But, the interests will be higher at the beginning and will decrease until the until the mortgage payment is completed.
In the past, the use of these mortgages offered stability for the mortgagor in exchange for a higher interest rate, but in recent years, fixed-rate mortgages have become more common. fixed-rate mortgages have been used by banks, which has lowered the cost of interest. has lowered the cost of interest.
To calculate the interest payment for this type of mortgage, the amount outstanding is divided by the interest rate divided by twelve. amount pending amortization is multiplied by the interest rate divided by twelve.
ExampleIf you make a mortgage of 100.000 euros, a 25 years and with an interest rate of 2%the first installment payment will be calculated by the following operation: 100.000×0,2/12. The result would be the amount to be paid for the first installment of the mortgage.. In order to calculate the next installment payment, you would have to subtract in the formula from the initial amount the first installment payment. the payment of the first installment.
The interest received on mortgages are often significantly lower than the interest significantly lower than the interest interest rates on personal loans personal loansThe interest rates on mortgages are usually significantly lower than those on personal loans, since the mortgaged property itself serves as collateral for the financial institution in the event of non-payment of installments.
How is interest calculated in a variable rate mortgage?
In variable-rate mortgages, the Euribor is in charge of determine the payment of each monthly payment. For a stipulated time, which is normally varies between 12 or 24 monthsThe interest will have a fixed value. Once this stage has been completed, the value of the quota becomes variable, and will be calculated by means of a differential established by the entities at the value of the Euribor.. This interest will be reviewed annually or semi-annually and the interest will fluctuate according to the value of the Euribor.
The way to calculating is the same as the fixed-rate mortgagebut it will be the Euribor that will will determine the interest rate.
The amortization schedule and early amortization
The amortization table is a tool offered by financial institutions to help borrowers calculate the interest on their mortgage or other payments they have to make. calculate the interests of their mortgage or those payments that they have to face.. In it you will find the formulas already applied so that you only have to enter the data related to the mortgage and you can obtain the interest results. This amortization table can only be applied to fixed rate mortgages and mixed mortgages during the fixed period.since it does not take into account the variations of the Euribor.
It is also important to assess the ability of early amortization to capacity of early amortization. This means advance the mortgagor a part of the loan loanand thus reduce its debt. In addition, performing this action provides two possibilities to the mortgagor, which are:
- Reducing the mortgage term. The mortgagor will finish paying the mortgage in one year. shorter term and since it faces a lower principal payment, it will have to make a lower payment of lower interest interest payments.
- Reduce quota. Although the mortgage term will be the samethe payment payment will be made in a more more comfortable for the mortgagor.
Once you understand what types of mortgages there are, how to calculate the interest and the options offered to calculate and amortize them, you will be ready to choose which mortgage is best for you. which mortgage is best for you. adapts to your budget and how long you will be tied to it. To facilitate the entire mortgage process you can ask for help from professionals who will be in charge of advising you at all times. If you have any doubts or questions, please do not hesitate to contact us through our
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