Mortgages can be extended over the repayment period to fit the needs of the client. You can request more money or a longer period of time to deal with debts.
Mortgage is one of the financial products better known.
Mortgages are loans for a significant amount of money and, therefore, they usually take quite a long time to be repaid. According to data from the Association of Property Registrars, the average duration of mortgages granted in 2014 was 269 months (22 years and 5 months). In this time many things can happen, and some of them force to modify the conditions of the mortgage.
Banks often allow mortgages to be extended if certain requirements are met, either to request more money or to make the payment conditions better, predictably with a decrease in fees. Mortgages, therefore, can be increased capital, amortization or both.
A housing reform, a regrouping of loans or other similar circumstances can make the mortgaged person need more money. Sometimes, and if the bank allows it, the extra amount may not be dedicated to the home, but may serve other purposes such as acquiring a vehicle, making a trip or coping with other improvised expenses.
To carry out this mechanism, the bank has to be sure that the mortgaged can cope with the new amount owed. This will be deducted from your income, property and the amount of other credits (if any). There is no single method used by all banks to know if a customer can pay, but it is usually tried that the total expenses derived from housing and the rest of the loans does not exceed 35% of the monthly income.
Extended repayment time
The other option to extend a mortgage is to request more time to deal with the payments. In this case, the amount to be owed remains the same as in the beginning but the payback time would increase.
The benefit to the client is to pay less for the repayment of their loan every month. Thus, if your financial situation has been complicated at any given time can make the amount of the installments adjust more to their possibilities.
Costs arising from extending the mortgage
Carrying out the mortgage extension involves a series of expenses for the applicant, which respond to both commissions from banks and to management and taxes. The most important are:
Commissions for novation: depends on the bank and the conditions under which the loan was signed. Typically, they range from 0.1% to 1% of total borrowed capital. Of course, each mortgage contract establishes its conditions in this respect.
Notary: The notary also supposes an expense in this process since it has to give faith of the changes in the writing. It assumes between 0.2% and 0.5% of the capital to be amortized.
Property registration: they have to modify the mortgage notation associated with the property. It costs about half as much as the notary.
Valuation and management: Banks often hire external agencies for these functions. They have to assess the property on which the mortgage is issued to determine their real value, as well as carry out the necessary procedures before the different institutions. Each agency and appraisal agency sets its rates so it will not depend on which one is chosen.
Taxes: When modifying a mortgage, the payment of the Tax on Documented Legal Acts, which taxes these procedures, must be paid. Its amount depends on the Autonomous Community in which it is made and round 0.5% of the capital due.