Simplification of home loans

This is an auspicious period for those who wish to apply for a home loan. The banks have some availability for your dream house. But what do you know about home loans?

In this article, we decipher some terms we regularly hear, but for some reason, we do not pay attention. So that you are informed when the time comes to go to the bank, read all about it and make the best possible deal with the bank. 

Bank interest

We all know what bank interests are, but when we talk about home loan interests, do you know everything? Lately, we’ve been hearing how the interests are negative, but what does that mean? These are some of the questions that may arise.

When a home loan is applied for, we know in advance that we have a deadline to repay the whole capital borrowed. Attached to that amount comes the bank interest, both the amount and the interests must be amortized through a monthly payment.

• Remunerator interest

The whole amount the bank gives is always associated to a remunerator interest. In other words, the whole capital must be returned, as well as the remunerator interests, which is to say, you will have to pay for the service provided by the bank.

Remunerator interest will be charged on the amount requested by you, corresponding to the nominal annual interest rate. (TAN).

• Default interest

By defaulting or if you’re late on the house loan monthly amortizations payment, you automatically go to late interests. You’ll be subject to the default interest, which implies an annual surcharge, with a maximum value of 3%.

Indexing

Did you know the word indexing? And the acronym EURIBOR (European Interbank Offered Rate)? EURIBOR is the reference interest rate most used in Europe, where every day the tax is determined and disclosed at 11.00 am, central European schedule, to all participating parties and the press. What determines this tax are external factors, such as economical circumstances like economical growth and inflation level.

When you apply for a bank loan you will be asked which tax you prefer, fixed, variable, or combination tax. When choosing the fixed tax, EURIBOR will not apply to the monthly amount you pay, as the amount is fixed and does not vary from month to month. Regarding the other two taxes, EURIBOR will apply on the combination tax only for a short period of time and on the variable tax it is applied every month and will be revised from 6 to 12 months, making you pay more or less depending on the EURIBOR index.

ESIS

The ESIS acronym means - European Standardised Information Sheet. When you apply to a bank loan, a credit contract condition simulation is given on this sheet. The information given in this sheet is valid for 30 days, so you can make an assessment to other banks and choose the most advantageous for you.

A new ESIS with all approved conditions will be given after the bank loan is authorized. A loan contract draft is also given. After that, you’ll have 7 days to consider if you want to proceed with the conditions described in the ESIS and draft contract.

Banking language can be confusing to anyone who wants to apply for a loan, whether it is housing or a personal loan. There are many acronyms that we must understand so that we can negotiate credit. This is a small sample of the terms used. Follow the articles of Casas do Barlavento so that you can keep up with everything on this topic. (see how to negotiate your bank loan here).