If you get an additional income that you did not expect, you not only have the options to spend it or save it, you can also use it to reduce your debts. Although in principle, if you have several, it is advisable to cancel the one that generates the most interest, that is, the most expensive, several experts recommend that you give priority to lowering the Mortgage Credit. Find out why and how to do it below.
The smart decision
If you take into account that a Mortgage Credit is contracted for an extended period (it can legally reach up to 40 years, although the average is 20), being able to free yourself from this obligation in advance represents a great long-term savings. In effect, all the capital you pay in advance will mean that you will not have to pay interest on that amount during the rest of the contract term. In addition, this offers you the possibility in the future of going back into debt if you have that need.
In Chile, the legislation guarantees you the right to prepay your mortgage, either totally or partially. However, this benefit must appear in the respective contract, which details the specific mechanism. But there are some limitations such as, for example, the creditor must agree if the payment is for less than 25% of the principal of the loan or if it exceeds 5,000 USD (Development Units). In addition, if it is a mutual call with letters, no payments can be made during the draw months for said letters.
When partially canceling your loan, you can choose between two options: it is possible to reduce the term of the mortgage, in which case you will be released from it in less time, or decide to lower the amounts of the dividends, that is, the monthly installments. The latter is advantageous if you want to improve your cash flow, since you will have more money available every month for other expenses. In both cases, however, you will save on mortgage loan rates, as explained above.
In short, advancing the payment of a Mortgage Credit is perfectly possible. The option you choose will depend on whether you want to lower the dividend or simply pay the mortgage in less time; Any of these possibilities will be beneficial to you.