When arranging a mortgage, the applicant sets, among other things, a regular monthly mortgage payment. This consists of two parts, namely the mortgage and the interest.
How to pay the mortgage?
A mortgage is a long-term loan secured by a mortgage on a property that is intended for residential use. The property being financed is usually used as collateral, but other property can also be used as collateral. A mortgage loan (mortgage) can be for a specific purpose (purchase of a house or apartment, construction of a house, renovation, purchase of a house to be rented out, refinancing of a mortgage, property settlement) and not for a specific purpose.
In the vast majority of cases, a mortgage loan is repaid by annuity payments, the amount of which is constant throughout the term of the loan. That is, as long as the interest rate does not change. This always happens after the end of the fixation period, when the amount of the repayments also changes.
In exceptional cases, the mortgage can also be repaid by progressive repayments (which increase gradually) or degressive repayments, which decrease over time.
The following parameters affect the monthly mortgage payment:
- Mortgage loan amount
- Maturity period
- Interest rate
- Method of agreed repayment of principal
Focused on the annuity payment
The annuity payment includes both the principal repayment itself and the interest you must pay the bank for borrowing the funds. The amount of the repayment is fixed throughout the interest rate fixation period, but the ratio of principal and interest repayments varies. In the beginning, you pay more interest than principal, but over time the interest decreases and then the principal makes up the majority of the repayment.
Did you know that you can also use extra payments to pay off your mortgage?
If you meet certain conditions, you can deposit it once a year for free, and at any other time with minimal fees. This is an extra payment you send to the bank outside the agreed repayment schedule. You can then decide whether to use it to reduce the amount of your repayments or to shorten the term of the loan.
What to do if you are unable to pay your mortgage?
A mortgage is a loan that the client repays over a number of years. It is difficult to predict in advance what will be needed in 10 years, yet he should not go to the limits of the loan amount and his income. Even when taking out the loan, try to have some financial reserve. However, when it really happens that he cannot pay the mortgage, it is important to inform the bank in time and ask for deferment of payments or extension of the final term of the mortgage.