Mortgage credit facility: definition and types

Useful advise and an explanation of mortgage credits
With a home equity loan the customer receives a specific amount of money, along with a commitment to pay it back along with the associated interest, usually through a series of periodic installments. These are medium-term or long-term loans, and they tend to be guaranteed by a home as collateral, under the terms and conditions that are agreed upon with the bank and formalized in a contract.
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There are several types of mortgage credits/loans, which are usually distinguished by how payments are made (since this can be freely negotiated and can even change over time if the customer requests it and the bank approves it). For example, an agreement can be made to keep the payments small initially, with the amount then increasing as the years go by. This type can be interesting if, for example, we consider a salary rise. Or it could be the other way around: pay large installments at first, with their amount then decreasing over time (appropriate in cases where, for example, there is another medium-term or long-term expense expected).

 

Differences between a mortgage credit and a mortgage loan

A mortgage credit has many similarities with a mortgage loan. Although they have the same aim, they work in a different way. It is important to know the particularities of each type when deciding between one or the other; We have to decide which is better adapted to our conditions.

A mortgage loan is thus closed: its terms and conditions are specified in a contract, so if the customer wants to make any changes after the loan is signed, a novation of the contract is required (for example, to extend the term, receive more financing, etc.).

On the other hand, with a mortgage credit, a quantity of money is granted, and the holder can access all or part of the money granted. Any time the customer needs more money, the amount still available can be drawn upon, as long as the total amount being extended does not exceed the credit limit granted by the bank.

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There are also other factors that differentiate the two products, such as the interest rate (generally higher with lines of credit), fees, ability to switch lenders, etc.

If you're going to request a mortgage credit, you should first analyze your current and future financial situation as closely as possible. When paying it back, it is important to plan the payment, as it is usually paid back over a number of years, and this should be kept in mind when doing calculations. Consider other expenses that you are going to have over time, look at your saving capacity and assign a fixed percentage of it to repay your credit.

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