Mortgage essential operation
A mortgage is normally granted against a property with a guaranteed obligation.
Normally the guaranteed obligation consists of having to give back a granted credit, or a given loan, plus the accessory responsibilities derived from the possession, that they are delimited using three fundamental parameters:
- The capital (or main), that is the sum of money given by the indebted creditor to the mortgating one. The post of the debited capital usually is smaller than the value of accomplishment of mortgaged property, so that this one can respond of the capital reaching an effective solution in a public auction, in case one has to take place if there is a non-payment, or starts off, of the credit or the debited loan.
- The term, that is the time that will take the return from the capital and its accessories. The return of the loan is realised by means of periodic payments (generally monthly), until giving back the capital asked for plus all the accumulated interests during the agreed time to give back the main one.
- The type of interest, that indicates an annual percentage that it is due to pay to the mortgagee (bank, savings bank, financial society, or individual) for gains of the capital.
The type of interest can be as well:
- Fixed: It maintains his value throughout all the term of the loan.
- Variable: Its S-value is reviewed periodically with the aim to adapt its value to the present state of the economy. Some economic index like the euribor, Libor or the IRPH is used generally, to which a differential is added to him so that the interest of the mortgage always is superior to the reference index.
Once known the 3 parameters previous it is possible to realise the calculations to know as they will be the gains of the bank by the concession of the loan and what will be the quota that we must pay monthly until amortizing it (return of the money to the bank).