Every month you pay a fee on your mortgage loan . Do you know what you are paying? Here I tell you how the mortgage loan is made up.
Many times we pay our bills and we don’t really stop to think what we are paying. For example, the rent. Do you know how much corresponds to administration and how much to rent? Or, when you pay for the administration of your Apartment, do you know what percentage corresponds to surveillance? A similar thing happens with mortgage loans. We pay them without knowing very well what they are charging us.
Many clients do not analyze payment receipts or how the mortgage loan fee is compounded. Do you have your payment receipt handy? All right. Let us begin.
The receipt tells a complete story. We know how much the credit amount is, how much you will pay for the credit, how long it will take you to pay and what other financial costs you are paying in the monthly installment.
How do you set the value of your monthly fee?
Let’s look at the following example:
The mortgage loan fee depends on three major factors:
- The amount requested as a loan;
- The term to which it is going to be paid; Y
- The rate at which the financial institution will charge interest.
There is another factor that affects the final cost, but its value is lower:
- Debtors life insurance and all risk insurance.
1. The first component of your fee is the fee.
In Colombia, the average interest rate of banks at the end of March in the consumer portfolio was 19.78% annual cash and the credit card at the same cut was 31.24%. For VIS housing loans, the average rate is 12.97%.
The rate for this type of credit is presented separately depending on whether it is requested to acquire a house or to build it and if the credit is destined for a social interest housing (VIS) or a non-VIS one.
On the other hand, the credits in pesos correspond to those that are established with a fixed rate and that have a fixed fee during the credit time, while the credits in real value units (UVR) have variable fees, following the UVR certified by the Bank of the Republic.
2. All risk insurance and debtor Life insurance
On your payment receipt you can see the insurance status. In this example, the client negotiated debtor life insurance jointly with an insurance company. The bank charged the study of the policy endorsement in the first month.
About the Insurance of goods in Colombia, the values insured by contents must be between 10 and 150 million. For all-risk insurance, the average rate is 3.2 per 1,000. That is, for a 100 million property, the policy would cost about 320,000 pesos plus VAT for a year of protection.
3. Other values
In each column, your bank details the evolution that the credit will have month by month. For example, it shows the value of the installment, amortization, interest and balance.
- You will see that the monthly installment is equal to the interest plus the value of the amortization.
- Interest is the value you will pay the bank month by month for the credit.
- Amortization is the amount paid to capital, to the amount of the loan.
Initially, almost the entire value of the fee is used to pay interest and only a small part to pay the debt. About halfway through the total loan period, you will see that the opposite is true: your money is mostly destined to pay capital.
- The balance is the total value of what you owe to date. For example, if in the 100th month of your credit you want to pay the entire debt, look at the “balance” figure, that is the value you will have to pay.
Financial institutions cannot charge “commissions” on businesses they carry out with mortgage loans. They can charge you for insurance, insurance endorsements, the study of guarantees and the mailing of correspondence.
The last columns? You better stay in zeros. These are charges for non-compliance in the payment of monthly fees.