Know all fees associated with mortgage credit.

To move forward with the hiring of a home loan, rely on the services of credit intermediaries Poupança no Minuto. They ensure free and fast personalized support, dealing with 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 rates can I choose?  

Mortgage credit has 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 Annual Nominal Rate (ANR), in the Effective Global Charge Annual Rate (ECAR), and in the Total Amount Imputed to the Consumer (TAIC).

Variable interest rate

When the mortgage credit is associated with a variable interest rate regime, the interest rate results from the sum of the benchmark and the spread, with:  

• The index rate is the reference interest rate corresponding to Euribor (European Interbank Offered Rate), the benchmark in the interbank money market resulting from the average of quotations from a set of European banks. A borrower can choose from different terms, such as Euribor at 3, 6, and 12 months. For example, if you choose the 6-month Euribor, your monthly installment is revised semi-annually. Since Euribor fluctuates, if it is decreasing, your installment decreases, if it is increasing (as it currently is), 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 credit.

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

Fixed interest rate  

When home loan is associated with a fixed interest rate, 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, depending on the credit risk, the ratio between the loan amount and the property value (loan-to-value), the cost of financing, but also the risk of fixing the rate for the long term of the contract.

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

However, beware that in times when Euribor rates are high (like now), the variable rate may exceed the value of the fixed rate. Eventually, when interest rates fall again, it will be less expensive to have a variable interest rate contracted.

Mixed interest rate

For housing loans with a mixed interest rate regime, a fixed rate period is added to a variable rate period thereafter.

It is possible to fix the interest rate on a home loan for 30 years, 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?

Nominal Annual Interest Rate  

The Nominal Annual Rate (NAR) is one of the rates that banking institutions have to present in the credit proposal, demonstrating the cost of the loan in interest.

Annual Percentage Rate (APR)  

The Annual Effective Annual Rate (APR) is another rate that represents the total cost of the loan, which includes interest, charges, and other expenses associated with credit.

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

In the calculation of APR, the following charges are included:

• Interest rate
• Commissions.
• Expenses with taxes, fees for mortgage registration (mortgage-secured credit);
• Required insurance: life and multi-risk.  
• Commission for current account maintenance (if opening is mandatory for the loan);  
• Cost of payment and credit utilization, if applicable.
• Other charges associated with the contract.

When calculating this fee, note that values such as non-compliance payments, early repayment fees, and notarial costs are not included.

Total amount charged to the consumer (MTIC)  

Another point where you can evaluate the total interest paid for credit, along with the total amount of the loan (with all associated charges) is the Total Amount Imputed to the Consumer (MTIC).

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

It is possible to analyze all proposed credit rates and their respective values in the simulation offered by banks in the pre-approval phase through the European Standardized Information Sheet (ESIS).

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