The mortgage: Worse far longer.

In his usual line warn of the great dangers they undergo the Spanish families in their madness mortgage, the Bank of Spain has returned to launch another warning.

The supervisor is clear that further extends the deadline, the more time a family is exposed to movements in rates and, above all, grows more bills of interest that has to pay the bank.

Specifically, the holder of a loan half -133,181 euros, to 25.5 years and an interest rate of 3.2 per cent, which wants to maintain the quota after a two-point rise in interest rates is bound to expand its credit for 20 years and, therefore, to remain mortgaged for 45 years.

The bad thing is not who is in debt longer, but that increase in more than 151,000 euros interest to be paid, which in total will be returned to the entity 345,000 euros for the credit, well over double the capital who asked and provided nearly 37 per cent more than they would have paid if it had not lengthened the credit.

The Bank of Spain expresses its warning to the increasingly common extensions of mortgages in its latest Financial Stability Report, which explains that to compensate for a rise of one point in interest rates is necessary to extend the mortgage in six years, while saving for a rise of two points we must enlarge other fourteen years, ie a total of twenty years.

From there, upload it to rise in rates, since there is no prospect of further expanding deadlines to compensate, because the cost of interest grows so will no longer be able to lower the fee even if the loan was extended to 1000 years.

The regulatory agency also conducts warnings on its Customer Portal Banking on mortgages offered by several years of absence, namely those in the early years only charge interest and, therefore, allowed to pay top shares more affordable.

"We must take into account the leap that occurs in the share in the year that was just the period of grace, and not forget that these calculations are made under the now-questionable premise-that interest rates will not to rise throughout that time, "warning the agency.

In particular, a loan of 133,000 euros with five years of grace and a rate of 4 percent, the pass holder to pay 433 euros a month the first five years to pay 621 euros a month for the next 30 years (not always go up types).

That way, at the end of the mortgage would have paid 8000 euros more than it would have paid if it had not enjoyed the grace period during the early years of the loan, usually the most difficult for an average home buyer.

Given these different possibilities currently offered, many financial institutions already have receivables of up to 50 years and the expected rise in interest rates, the Bank of Spain advises users to before taking out a mortgage valued not only for what you have to pay the early years, but the following years and its ability to cope.

Written by Carlos Lopez on May 29, 2006 with 13 comments
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