The interest rate for a mortgage loan is the percentage that is paid in addition to the amount of money requested. It corresponds to the amount of money that you must pay for the service that they provide you with money. The best rate for a mortgage loan could be the fixed one if the economic context is unstable, but a mixed one can be useful if you have good knowledge of the financial market, in order to be able to renegotiate the debt after a while.
The value of interest rates for a mortgage loan has a pre-established limit by law and is regulated by the Superintendence of Securities and Insurance. This cap is known as the “Conventional Maximum Rate” and is set as a percentage on a monthly basis for all banks and financial institutions.
It should be noted that this maximum rate must be met by the borrowing entities, regardless of the type of credit you request and regardless of whether it is financing with a fixed, variable, or fixed interest rate.
How does the interest rate for a mortgage loan work?
Mortgage credit is the largest financial product on the market. Due to the magnitude of buying a property, it is the highest sum of money that a bank can lend to a natural person.
This also means that this financing has the longest duration in its installments, with an average duration of between 15 and 20 years according to data from the SBIF. Therefore, finding the best rate for a mortgage loan matters, and a lot. It will be the percentage that you will be paying on the loan amount for a good part of your life, so it is good to be sure that you will be able to cover it.
Types of interest rates
When you ask for a mortgage loan you have to look at the type of rate since in Chile today you can choose between three options:
Fixed
It means that the percentage of the loan that you will pay will be the same throughout the duration of the credit, regardless of its duration or the economic changes that may occur. They are at higher rates, but at the same time, they present less risk, since they will not present variation of the monthly dividend. If the situation in the country is very unstable, it is always the best option.
Variable
In this type of mortgage credit rate, the interest percentage is reviewed every six months or annually and may increase or decrease depending on the progress of the economy.
At the time of requesting the credit, a reference index is taken. Each time the agreed review period is met, the new percentage is determined based on the value of the reference index at that time. The rate is lower than the fixed one because it has a higher risk. Therefore, it is only recommended if you have expectations of increased income.
mixed
As its name indicates, this interest rate for a mortgage loan is the mixture between the fixed and the variable. When requesting a loan, the bank applies a fixed rate, which is agreed for a certain time, in a range of between 5 to 7 years. After this period, a variable rate previously stipulated by the client and the bank begins to apply.
Differences in interest rates
Understanding the importance of the interest rate when applying for a mortgage loan is only the first step. The fundamental thing is to know the differences that exist between the rates available in the financial market, to make the most of them and not spend more.
According to studies by the National Consumer Service, year after year large differences are detected between the values of loans from different financial entities for the same credit, with the same rate and term.
That is why we recommend that you compare and simulate the options available in the credit market, so you make sure you make a correct choice. From our simulator, you will be able to compare the advantages of each institution and observe the interest rate for a mortgage loan.
