Mortgage credit: definition and types

Useful tips and explanation about mortgage loans

In a mortgage loan, a client has an amount of money committing to return it normally through regular installments, along with the associated interest. It is carried out in the medium or long term, and it is usually supported by the guarantee of a home, under conditions agreed with the bank, and set out in a contract.

There are several types of mortgage loan/credit, normally determined by the type of installments (since they are open and may vary over time, if the client requests it, and the bank approves it). For example, it may be agreed to pay smaller fees at the beginning, to grow over the years. This modality can be interesting if, for example, we contemplate a salary increase. Or it could be the other way around: paying larger installments at first, and decreasing in time (convenient if, for example, we foresee another expense in the medium or long-term).

A mortgage loan shares many similarities with the mortgage loan. Although they have the same purpose, they work differently. It is important to know the particularities of each modality when deciding on one or the other; we have to choose the one that best suits our conditions.

Thus, the mortgage loan is closed: it has certain conditions in a contract, that in case they want to be modified by the client, once the mortgage loan is formalized, a notation must be made (for example, to extend the term, the amount to be financed, etc.).

On the other hand, in the mortgage credit, an amount of money is granted, and the owner can dispose of the total or only a part of that money granted. Whenever you need more money you can have the remaining one, provided that the total amount you are using does not exceed the credit limit granted by the bank.

On the other hand, there are several other factors that distinguish both products, such as the interest rate -generally higher in the credits-, the commissions, or the subrogations, etc.

If you are going to apply for a mortgage loan, a good advice is to first analyze your current and future financial situation, as far as possible. When it is time to return it, it is important to plan the payment, since it is usually returned in several years, and it must be kept in mind when calculating. Contemplate other expenses that you are going to have in time, look at your savings capacity and allocate a fixed percentage of this to return your credit.