Mortgage amortisation: is it worth it?
If we have money saved up, and we are paying a mortgage, we may have doubts about whether it is worthwhile to repay the mortgage loan before the established deadline. Coral Santacruz, from the 11Onze product team, details the advantages and disadvantages of early repayment.
The cancellation or partial or total repayment of the mortgage loan consists of reducing or totally paying off the outstanding debt you have with the financial entity before the term established in the contract. In other words, using your savings to cancel or pay off part of the debt with the bank.
Although a priori it may seem a good idea to use saved money to repay or reduce a mortgage loan before the deadline, everything will depend on the repayment conditions that have been signed in the mortgage contract.
Reducing instalments or amortisation period
If we decide to make a partial repayment, we can reduce the amount of the instalment (in reference to the capital and interest), or the term (the time it will take to repay the loan). Therefore, “we have to assess which of the two options is the most viable for us, depending on whether we want to settle the loan or pay less each month,” says Santacruz.
Regardless of which option we choose, we will have to inform the financial entity of our desire to amortise the mortgage and explain the typology we want to apply for. We have to bear in mind that applying this process has a cost, as Santacruz explains, “it is the commission for early repayment, and when signing the mortgage we will have to look at what conditions the financial entity offers us in this regard”.
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