Financial Dictionary - Mortgage deed
The mortgage deed is an official document stating the clauses and conditions that the bank and the customer have agreed to establish a mortgage.
This document is commissioned by the bank and issued by a notary public, and must be included in the Property Registry to acquire an official and probative nature. The notary will give one copy to the bank, another to the customer, and will include a third to settle taxes. Your mortgage will condition you financially for many years, so you must check the deed carefully and be very sure before signing it.
Ten days before signing a mortgage deed you will need to go to the notary to take a good look at the paperwork. This procedure will be carried out free of charge. We recommend going to the notary's office as soon as possible to give you time to think about it and be really sure before taking the step. You will need to ask about anything that you do not understand, and not sign anything that you do not understand or do not agree with.
What information does the mortgage deed contain?
First of all, the loan principal (this means: the sum that the bank is going to lend. The interest on the mortgage will be calculated by taking this amount into account): Then there is the mortgage term, or the time during which you will be paying it. This is normally between 15 and 30 years, but the longer the term is, the more money you will pay (due to the interest generated), but in smaller instalments. There is also the loan interest rate. This is the percentage you will pay to the financial institution for lending you the money. This interest will be fixed, if it does not vary during the life of the mortgage, or variable, if it varies every now and again according to the fluctuation of interest in the market. In addition, the repayment system, which means: the way you will pay the money back.
In Spanish mortgages, the French system prevails, by which the interest is paid at the beginning, and the principal afterwards. Also the interest-only period when you are only paying the interest (and not the principal) to the bank. Although instalments are lower during the interest-only period, in the long run you will end up paying more money, because you will not be repaying principal during that time. There are also fees charged by the bank. Certain additional service (interest rate risk fees, cancellation fees, etc.). And the late payment interest, if you are late paying your instalments or stop paying them; early maturity (which happens if you repay the loan earlier than stipulated); and lastly, the Annual Percentage Rate (APR), which is the index that determines the cost of the mortgage.