Definition of the concepts to a Mortgage

As follows are the terms that are associated with the process of contracting mortgage loans when buying a house:

  • Capital: is the amount of money that the bank lends. In general, the highest amount granted by the entities is up to 80% of the value of the appraisal or purchase of the home.
  • Term: is the time given by the bank to return the whole mortgage loan, usually by paying monthly installments. It is also called the amortization or reimbursement period.
  • Guarantee: is that which guarantees that the credit will be returned, this means, what the bank will keep if the money is not returned. In mortgage loans, the guarantee is both the financed home and the present and future assets of the owner. Sometimes, the entity may require a third party to support the payment of the mortgage with their assets (guarantee).
  • Interest: Is the price of the mortgage, that is, what the bank charges for lending money. In mortgages, this can be: fixed, a constant value. Variable, that is, a fixed value (called a differential) plus the price of a reference index such as the Euribor. Mixed, a mixture of the previous two. In the variable rate mortgages, in addition, a fixed interest is usually applied during the first 12 to 24 months (initial nominal interest rate or TINI).
  • Ground clause and zero clause: the mortgage clause or floor clause limits the minimum interest that can be applied to a variable mortgage, while the zero clause establishes that limit at 0%. The soil clauses included in the contracts with lack of transparency are considered abusive and, therefore, void.
  • TAE: stands for annual equivalent rate, a standard measure that reflects the interest of the mortgage, commissions and other expenses. It is an indicator that allows you to compare the price of several loans quickly.
  • Commissions: they are charges that must be paid for certain operations. The most common are those of opening (for formalizing the mortgage), early repayment (for advancing capital) and subrogation (for changing banks).
  • Related products: are the products or services that the owner has to contract to reduce the interest on the mortgage. They can be direct debits or receipts, home or life insurance, credit cards, pension plans, etc.
  • Mortgage expenses: it is what it costs to deed and register the mortgage and are composed of notary and registry fees, the price of the appraisal, the fees of the agency and the tax on legal acts documented (IAJD). Together with the expenses of the deed of sale, its cost can reach the equivalent to  10% and 15% of the house price.
  • FIPRE and FIPER: these are the Pre-contractual Information  of the mortgage and the Personal Information respectively. The first contains only the generic characteristics of the loan, while the second includes the conditions that the bank is willing to offer according to the applicant’s profile.
  • Binding offer: it is a firm offer of the bank that must remain valid for a certain period of time, which is generally 15 calendar days or more. During this period, the owner can search for other offers.
  • Novation: operation that allows to modify any clause of a mortgage already signed by means of an agreement with the lender entity.
  • Subrogation: operation that allows the mortgage to be transferred to another bank to modify the interest or term (subrogation of the creditor) or replace the holder with a different one (subrogation of the debtor).
  • Early amortization: operation that consists in advancing all or a part of the pending capital of the mortgage. When making that reimbursement, the bank gives the option to shorten the term and maintain the fee or to maintain the term and reduce the fee.
  • Foreclosure: is the process that begins after repeated failure to pay dues and culminates in  seizing the home and  subsequent sale at public auction. If the sale of the property does not cover the outstanding debt, the owner will have to return it with the rest of present and future assets (income, accounts, etc.), which may be seized until it is paid finally
  • ➡: Data Source: Habitaclia
Definition of the concepts to a Mortgage
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