Have a money saved when they are paying the letters of a mortgage It can be a great asset to invest in the same loan, with the aim of reducing its cost. Repaying a part of the borrowed capital by returning the money to the bank in advance will in any case have saved interest once the mortgage ends. The doubt that borrowers who have a certain amount of money to reinvest in their loan could have, however, is if this is precisely a good time to start that amortization. And, if so, what would be the best way to do it. The experts help to dispel them.
Once obtained the loan after have put a home as collateral (generally, the main residence), the user will have to return the loaned capital through a monthly fee, composed of a fraction of the money received plus interest. To calculate it, it is usual to use the French system, "in which the proportion of interest is high at the beginning, and decreases gradually throughout the loan, until it is almost nil at the end", explains the general director of the intermediary BGestión Global, Mercedes Blanco. So a first criterion is that, ideally, advance the payment of the debt when you are in the first years of the mortgage is better than in the last, since at the beginning we are paying more interest than in the final stretch.
The interest rates
But, if the timing it has its importance, in the variable mortgages there is no need to analyze the forecasts on the evolution of the interest rate. In loans with variable interest, the rate consists of a reference index that can rise or fall over time, like the Euribor, plus a differential. The Euribor is already three years in negative levels (ie, instead of adding to the differential, subtraction) and the entities have waged a war to offer very attractive differentials. The result is that the interests that are currently paid in a variable mortgage are very low, but all the experts predict that they will rise in the long term, as the Euribor increases in the coming years.
For example, with a mortgage of 130,000 euros at 30 years and a spread of 0.99%, advancing 10,000 euros with the Euribor at current levels, and assuming that we are in year 3 and month 6 of the loan, would mean savings of about 2,600 euros, according to calculations of the iSavings bank comparator. On the other hand, if we were to wait for year 10 and month 6 of the loan, and in the event that the Euribor in 7 years is at 1.8%, with those same 10,000 euros of amortization we would save about 7,200 euros, that is, 4,600 euros more.
"Of course, if there is a forecast of an increase in interest rates, you will save more money if you amortize when this increase occurs," Blanco admits, so perhaps, if the level of the Euribor was the only criterion to be taken into account. , it would be good to wait. Although this is one of the general rules, Álvaro Casero, spokesperson for the Association of users of banks, savings banks and insurance (Adicae), also invites to consider the specific conditions "offered by financial entities in their mortgages and not only the Euribor, since they can vary substantially between them ".
Term or fee?
In any case, once the most opportune moment to amortize the mortgage is decided, the dilemma for the user is if, with that money, it is convenient to reduce the installment or the term of the loan.
Let's take the example of a mortgage loan of 130,000 euros to 30 years with a fixed annual interest rate of 0.99%. In this case, the lender will have to pay 360 monthly payments of 417.50 euros each, approximately, according to BGestión Global calculations. Which translates into a cost of interest of 20,312 euros.
If in the fifth month of the third year of the loan the user wants to reimburse 10,000 euros in advance and chooses to reduce the fee, from that moment it would remain at 383 euros and the total interest savings would rise to 1,431 euros. On the contrary, reducing the term would mean paying the same fee (417.50 euros per month) for a period of two years and seven months lower. That would translate into a total interest savings of 2,976.20 euros, that is, 1,545 euros more. "In general, it is always better to shorten the term, because more interest is saved than if the quota were reduced," says Ricardo Gulias, general director of the intermediary Tu Solución Hipotecaria. Of course, "as long as we are paying the fee without stress; if not, better reduce this and leave the term without variations, "he advises.
Taxation and depreciation costs
This expert also points out that having signed the mortgage on the habitual residence before January 1, 2013 implies the possibility of obtaining a tax savings of up to 1,356 euros (or double, if a marriage presents the Income Tax return individually) if they are amortized up to 9,040 euros per year (or 18,080 euros). "In this case, we would have it clear: advancing money will allow us to pay less taxes."
According to Gulias, when a user is considering the possibility of amortizing part of his mortgage, it is important to calculate also "what profitability could be achieved with that same money if, instead of advancing the payment of the loan, was invested in a fund or some other product" "The key is to know if that saving is greater than what you can get by investing," agrees Casero.
The user must also bear in mind that amortizing the mortgage has a cost. For fixed rate mortgages, the new real estate credit law – which will come into effect in May and to which the new contracts must be adjusted – provides for a maximum commission of 2%, if the early repayment is made in the first 10 years of the loan. If the early amortization was made at some later time, the limit of the commission would be 1.5%. In variable mortgages there is only one possibility: or up to 0.15% of the capital returned, if the anticipated repayment was made during the first five years of the contract, or up to 0.25% if it was made during the first three years. "In different cases" to these, the bank "may not collect compensation or commission for reimbursement or full or partial early repayment," reads the regulation.
"We are critical of the new law," says Casero, "and we believe that the cancellation or early amortization fees on both mortgage and consumer loans should not have any negative consideration for the borrower, since in essence the he is paying the borrowed money with greater urgency than the one that collects the policy, throwing an anticipated benefit to the financial entities ".