A mortgage loan consists of receiving a certain amount of money – capital – by a bank in exchange for the commitment to return said amount, plus the corresponding interest – based on the interest rate -, through the periodic payment of installments that are usually monthly. As a guarantee of payment, the property that is acquired is also offered. This is the definition of a mortgage loan offered by the Bank of Spain and contains the three key elements to understand how a mortgage works: principal, interest and repayment period.

Principal: It is the amount of money requested from our bank when acquiring or renovating a home. As a general rule, the bank finances up to 80% of the appraised value of the property and the remaining 20% is delivered by the client as the first payment at the time of home purchase.

Interest: It is the economic benefit obtained by the bank for granting the client access to the requested financing.

Payback period: It is the time that we are going to take to return the capital that they have lent us plus interest.

Advantages of a mortgage:

• It helps to get an affordable house.

• It offers a simple and easy way of acquiring a house by paying little by little.

• It offers tax benefits such as a decrease in the value of tax.

• It offers lower interest rates compared to other types of interest.

• It offers a compulsory way of saving money.