Mortgage

reverse-mortgage

What is a mortgage?

A mortgage assumes two elements:

  • A loan agreement in which the financial institution becomes the lender that lends a certain amount to be repaid within an agreed period and determined interest.
  • A guarantee for the loan.

Who intervenes?

  • Property buyers that by signing the loan agreement become debtors of the same.
  • Financial entity, which is the lender of the loan and the mortgage that accepts as collateral the same.
  • The notary, since this loan agreement generally is made ​​on the form of a public deed.
  • The solicitor, on the account of the financial entity that will perform all the necessary steps to do the settlement effects related to the mortgage, and assures the registry inscription has a dept warranty.

Mortgage types:

  • Acquisition
  • Construction
  • Renovations
  • Rental purpose investment

Amortization (Repayment):

  • It Is the payment of the capital liabilities carried on each monthly loan. Like in the French system, which are the majority here in Portugal, the payment of the beginning of the loan starts with the interest and after you start paying the actual lone.
  • The money that is given to the financial institution, outside the normal monthly payments, is called amortization and if the debt is paid off all at once will be a full early repayment.

Provisions:

  • Constant installments: the value of benefits is constant over the life of the loan, suffering only changes in rate revisions in accordance with the variation of indexing, or in case of changes in the conditions, such as interest rate, term of the agreement, early amortization.
  •  Progressive installments: The value of benefits evolves over the life of the loan or for a period agreed upon between the parties.

Interest:

  • Fixed interest rate: the rate is maintained during the term of the loan, so the monthly benefit will not suffer changes.
  • Variable interest rate: the rate varies according to market developments

Spread or margin:

  • It is the percentage that credit institutions add to the reference index
  • Normally banks do vary the spread of an operation depending on the amount of funding, the value of property valuation and the risk profile of the client.

Annual Percentage Rate (APR):

  • The APR is an excellent point of comparison between different credit institutions, as in the calculation of the tax are weighted all costs associated with the credit: the nominal interest rate, insurance costs, opening, evaluation expenses, and so on.

Costs Associated with Mortgage Loans:

  • Commissions opening file: fee charged by financial institutions for the study of the credit process. It is a value set by each institution communicated to the Bank of Portugal.
  • Evaluation costs: amount paid by property valuation. As the cost of opening, this value is also free and can vary from institution to institution.
  • Solicitor expenses: optional cost for processing all documentation necessary to carry out a deed.
  • Commission for partial or total repayments: banks usually charge a commission for amortization of capital and generally vary between 1% and 3%.

Documents required for the formalization of the credit proposal:

  • Personal documents: identity card or passport, fiscal number, fiscal declaration (IRS), last notice of assessment statement from the employer with bond and seniority, last three receipts salary, bank statements, among others.
  • Property documents: The documents usually requested are updated Finance matrix Certificate registry, The Property content certificate, the user’s License or Inhabitation License, the plants of the building and building License.

Insurance:

  • Multi-risk insurance: When buying a property, there should be a multi-risk insurance to protect your property from some risks such as fire, theft, flood damage or explosions. The premium of this insurance is paid monthly and varies depending on the value of the property.
  • Life Insurance: Getting a life insurance guarantees the payment of the capital in dept, on case of death or permanent disability, releasing your heir’s from charges that would incur. The life insurance premium is also paid monthly and varies the amount requested and the age of the proponents.

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