2023-05-18 06:46:16
The rise in Euribor and interest rates has affected thousands of mortgage holders in Spain, in such a way that many of them are looking for options so as not to undertake a higher monthly payment that weighs down their economy. On the one hand, the Government offers aid to those who have been most affected and do not have the resources to pay the mortgage. And on the other, the headlines that have saved money They wonder if it is appropriate repay part of the loan to put an end to the monthly “bleeding”, especially in the case of variable mortgages.
Is it safe to use savings to pay off the mortgage?
This question is difficult to answer because not all people have the same risk threshold. What for one does not pose a danger to others can be. So, it is best to stick to what the financial experts recommend and this is to have a mattress that covers at least six months of fixed expenses.
Therefore, if someone with a smaller amount considers paying off the mortgage or investing in a banking product, they should think twice, since, if an unforeseen event arises, they could need those savings.
And if the savings are enough?
In the case of having sufficient savings to partially or totally repay a mortgage, rather than talking about security, it would be necessary to talk about profitability. As a rule, repaying a loan is beneficial, since interest is no longer paid and the monthly charge of expenses is reduced. However, there are some factors that determine whether it is more or less convenient. We list them below:
- interest is low. Obviously if the interest is low and the conditions of the mortgage have hardly changed, the fact of amortizing will be related to the need or convenience of the owner.
- How much is left on the mortgage? One aspect to take into account is the time remaining to finalize the mortgage loan. The reason is that during the first years most of the interest is usually paid, so that a good percentage of the monthly payment corresponds to this concept. Therefore, it is much more profitable amortize during the first half of the mortgage than in the second, when there is hardly any interest left to pay. Likewise, the term or installment can be amortized, in such a way that the same amount can continue to be paid per month for less time or the terms are maintained but the monthly amount is reduced.
- Commissions to be amortized. Another aspect that should not be overlooked when using savings to repay the mortgage is the possible commissions that banks charge for this action. Sometimes, the mortgage contract includes clauses that penalize premature amortization, so you have to check if they exist and, if so, calculate whether it is profitable to pay or not.
- Profitability of other banking products. Finally, there is the option of using those savings to make other types of investments that, in the long run, generate greater wealth for the mortgage holder. In the financial market there are very low risk products that generate profitability. This means that if the savings are invested, instead of using them to pay off the mortgage, the profits can be greater.
Be that as it may, choosing to end debts or reduce them is a very personal matter. Using savings to carry out an amortization can be insecure if you do not have an amount of money that allows you not to have financial problems in the face of any unexpected contingency. However, if you have enough savings, it will depend on the preferences of each person to go ahead or not.
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