2023-11-12 03:19:36
When the year ends, it is time to make contributions to pension plans, but also to pay off the mortgage if we have money left over, but is it profitable? This is one of the most common questions when talking about mortgages. In an analogous way when we deposit money to pension funds, Reducing mortgage capital has two aspects of profitabilitythe financial and the fiscal and both must be taken into account.
No deductions for the purchase of a primary residence since January 2013with interest rates at maximums, all these characteristics must be taken into accountbut the one that gains weight is the tax, if you are benefiting from this deduction for purchases prior to December 31, 2012 or if it is taxed in any of the provincial councils (Navarra, Vizcaya, Guipúzcoa and Álava) that have maintained them subsequently .
This tax credit allows you to receive more than 1,300 euros per year if you pay the maximum amount of credit, 9,040 euros per year for each owner and fiscal year. In any case, You will be able to obtain a 15% deduction for your contributions up to that limit, which represents a significant profit. If you want to maximize it, it is best to try to reach this limit every year until the mortgage ends.
When are you interested in paying off your mortgage?
In general terms, we can say that interested in paying off the mortgage when you have a good amount of money saved, especially if we know that we are not going to need it. This can happen if we receive an extra payment of money that we did not have. It may be due to payment for pending work or an inheritance. However, it is always advisable to be cautious when decapitalizing ourselves, because without a doubt, we run a significant risk.
But does it have to be done at the beginning or at the end of the loan? Even though we are at the end of the year and we have to try to pay off the mortgage and make contributions to the pension plan, We must take into account what stage of the loan we are at. In Spain, mortgages work through the French amortization system. This means that it is during the first years that higher percentages of interest are paid. In the last years of the loan the interest is minimal. What does this mean? Well, capital repayments should try to be made at the beginning of the loan, since it will help us pay less interest. At the end of the mortgage, it will be of little use to us.
Financial advantages if you want to pay off your mortgage
In addition to the tax benefits, there are financial benefits, the interest you save by reducing the capital. This advantage is the only one if you do not have the right to deduction. In this case, the most important variable to see its profitability is the capital that remains outstanding. If the amount is high, the amount of interest will also be high and it will be more profitable to partially amortize it than if there is little outstanding capital. Finally, interest rates also play a role, but don’t just think about the present. All of this makes it more interesting to amortize the mortgage at the beginning of the life of the loan than at the end.
Finally, interests must be taken into account. The higher the interest, the more profitable it is, but you also have to think about the medium and long term. Thus, although rates are low now, amortizing capital will allow you to save when interest rates rise.
Term or capital: advantages or disadvantages
Once the fiscal and financial variables have been identified, now We must take into account how to implement this amortization, a decision in which other variables enter. From a financial point of view, reducing the term is the best option. With less capital, you always pay less interest. Furthermore, by maintaining the same installment, the savings are much greater since payment is accelerated.
A priori, it is the best option, if we stick to financial criteria, but it is not always the only variable. By reducing the term, the financial effort is maintained and this may lead to some risk situation, such as if your work circumstances change and the family unit’s income is reduced.
Here comes the second possibility, reducing the mortgage payment. There is also less interest payment, since the principal is less, but financially the savings are less than if the term is reduced. What we do achieve is greater financial freedom, since we have more money available by paying less for the loan. This savings allows you to be more flexible, to have money for other purposes, but also to be able to allocate that savings or part of it to amortize capital in the following years.
For all this, the circumstances of each case must be analyzed. At a time with so little return on traditional savings such as deposits and accounts, repaying a mortgage is much more interesting, the more the greater the capital remaining, even if the interest is low. If you also have tax advantages, reaching the annual limit will help significantly increase these benefits. But it is always important that this financial effort does not lead to payment problems in the future or limit the economic capacity of the family unit.
fuente: habitaclia.com
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