If you've ever heard of an open mortgage and aren't sure what it is, how it works, and whether it's really worth applying for, here you'll find the most complete and detailed information on this type of financial product. Although it's not as widely used as a traditional mortgage, it does have certain advantages and risks which should be thoroughly understood before making a decision.
The open mortgage allows customers to access the money already amortized in a mortgage without needing to apply for a new loan. It is a financing option offered by some banks and allows for greater flexibility when managing payments and expenses over time. Therefore, it is advisable to know how to get 100% mortgage if you are thinking about this type of financing.
What is an open mortgage?
An open mortgage is a type of mortgage credit This allows the holder to request additional cash withdrawals as the debt is repaid. In other words, they have the possibility of accessing the capital already repaid from the loan again, without having to apply for a new mortgage or personal loan.
The bank, depending on the financial profile As a customer, you can evaluate whether to grant these cash arrangements or reject them. However, each of these arrangements functions as a separate loan with its own term and interest, which can create an additional financial burden. Furthermore, it is crucial to understand the mortgage trends to stay abreast of available options.
How does an open mortgage work?
The mechanism of an open mortgage is simple. The mortgage holder can request a new drawdown from the bank. capital As you've repaid part of the initial mortgage. That is, if you've repaid a specific amount of the loan, you have the option to use that money again.
To understand it better, let's look at an example:
Let's suppose we take out an open mortgage of 150.000 Euros at 30 years. After 10 years, we have amortized 48.000 Euros, so our outstanding balance is 102.000 EurosIf we need financing, we can request a provision of up to 48.000 Euros, which would be evaluated by the bank.
If granted, we would have two installments to pay: the original mortgage and the new loan associated with the disposition.
Differences between a mortgage loan and a mortgage credit
To better understand the open mortgage, it is important to differentiate between the mortgage loan traditional and the mortgage credit:
- Mortgage loan: An amount of is granted determined money for the purchase of a home and cannot be modified without a novation.
- Mortgage credit: It allows for greater flexibility, as a portion of the amortized money can be reused for future needs.
Types of open mortgages according to interest
There are different types of open mortgage depending on the type of interest that applies:
- Fixed interest: It remains stable throughout the life of the loan, with no surprises in the installments.
- Variable interest: It is based on an index of referencia (like the Euribor) plus a differential, which causes variations in the rate.
- Mixed interest: It combines an initial period with fixed and then variable interest.
- Secured open mortgage: Includes insurance to cover non-payments in situations of financial difficulty.
Advantages and disadvantages of an open mortgage
Before opting for an open mortgage, it is essential to know its pros y cons.
Advantages:
- It allows you to reclaim the money you've already repaid without having to take out a new mortgage.
- It usually has a more interest with than a personal loan.
- Offer flexibility in financing over time.
Disadvantages:
- If the provisions are abused, it can lead to a over-indebtedness.
- The provisions create new loans with additional terms and interest.
- These types of mortgages are more difficult to be surrogates or transferred to another bank.
When is it a good idea to take out an open mortgage?
Open mortgages aren't for everyone. They're an attractive option if you anticipate needing additional financing in the future, such as if you want to renovate your home years after purchasing it. They can also be a useful solution for those who want to liquidity without resorting to high-interest personal loans. If you're considering your mortgage options, make sure you understand how banking measures affect to your situation.
However, you must be very aware of the risks. If not managed properly, it can end up being a greater financial burden than expected, and in the event of default, the bank could initiate a foreclosure about housing.
Is it clear to you now what open mortgages are, so you can decide if they're right for you? We'll read your comments.
