Discover all fees associated with mortgage credit.

Discover all fees associated with mortgage credit.

The fees associated with mortgage credit depend primarily on the type of interest rate you choose. Therefore, let's see what rate regimes exist, the impact of each one, and where you can analyze the cost of interest in the credit proposal.

08 Sep 20236 min

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To move forward with the hiring of a housing loan, rely on the service of credit intermediaries Poupança no Minuto. They ensure free and fast personalized support, taking care of all your questions, documentation, and contact with banks. But to better prepare yourself before diving into the process, get to know all the fees associated with this loan, next.

What types of interest rate can I choose?

Home loans have associated interest rates, which can be governed by one of three modalities: variable rate regime, fixed rate regime, or mixed rate regime.

In addition, there are other associated charges and also commissions. These costs are represented in the Nominal Annual Rate (NAR), in the Annual Effective Global Charges Rate (AER), and in the Total Amount Imputed to the Consumer (TAIC).

Variable interest rate

When home credit is associated with a variable interest rate regime, the interest rate results from the sum of the index and the spread, as follows:

  • The index rate is the reference interest rate corresponding to the Euribor (European Interbank Offered Rate), the benchmark in the interbank money market resulting from the average of quotes from a group of European banks. A borrower can choose different terms, such as the Euribor at 3, 6, and 12 months. For example, if you choose the Euribor at 6 months, your monthly installment is reviewed semi-annually. Since the Euribor fluctuates, if it is going down, your installment decreases, if it is going up (as currently), your installment increases.
  • The spread is defined by each bank for each customer, based on credit risk, the ratio between the loan amount and the property value (loan-to-value), and the cost of financing. This rate can be reduced by the bank if the customer contracts other financial products in addition to the credit.

This fixed interest rate regime is usually the least costly. However, in times when the Euribor is at high values, it can have a significant impact on the monthly installments, as is currently happening. Therefore, it is a more unstable and less predictable regime compared to others.

Fixed interest rate

When the housing credit is associated with a fixed interest rate regime, the interest rate does not change throughout the entire contract. In other words, the monthly installment also remains unchanged until the end of the term.

The fixed interest rate is determined by banks as the spread, according to each case, based on credit risk, the loan-to-value ratio, financing costs, but also the risk of fixing the rate for the long period of the contract.

So, with a fixed interest rate you are not subject to Euribor variations, having greater predictability about the amount you pay monthly. Therefore, in the initial period, usually, the fixed interest rate is higher than the variable.

However, bear in mind that in times when Euribor rates are high (as they are now), the variable rate may exceed the value of the fixed rate. Eventually, when interest rates drop again, it will be less costly to have a variable interest rate contracted.

Mixed interest rate

In housing loans with a mixed interest rate scheme, a period of fixed rate is added to a period of variable rate consecutively.

That is, it is possible to fix the interest rate on a 30-year housing loan, for example, during the first 5 years and, then, have a variable rate for the remaining 25 years.

Which rates should I look at to know the value of interest?

Annual Nominal Interest Rate (ANIR)

The Nominal Annual Rate (TAN) is one of the rates that banks must provide in the loan proposal, demonstrating the cost of the loan in interest.

Annual Effective Global Rate (AER)

The Annual Effective Global Rate (APR) is another rate that represents the total cost of the loan, but in addition to interest, it also includes charges and other expenses associated with credit.

APR is expressed as an annual percentage of the loan amount and is one of the measures used to compare proposals, provided they have the same term and repayment method.

So, in the calculation of APR the following charges are aggregated:

  • Interest;
  • Commissions;
  • Expenses for taxes, fees for mortgage registration (mortgage-backed credit);
  • Required insurance: life and multiperil;
  • Current account maintenance commission (if opening is mandatory for the loan);
  • Payment and credit usage costs, if applicable;
  • Other charges associated with the contract.

In the calculation of this fee, please note that values for default payment, early repayment commission, and notary costs are not included.

Total Amount Charged to the Consumer (TAC)

Another point where you can assess the total interest paid for the credit, along with the overall value of the loan (with all associated charges) is the Total Amount Imposed on the Consumer (MTIC).

MTIC adds up the total value by combining: interest rates, loans, fees, taxes, insurance, among others.

It is possible to analyze all proposed credit rates and respective amounts in the simulation that banks offer during the pre-approval phase, through the European Standardized Information Sheet (ESIS).

Are you thinking about getting a home loan? In addition to rates and fees, there are many other concepts you will come across. To have all your doubts clarified, you can turn to a credit intermediary Poupança no Minuto. With a free service, the agents handle all the mediation, bureaucracy, and simplification of the credit contracting process.

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