How the rise in the Euribor benefits amortizing your mortgage
Those who chose to apply for a variable mortgage have suffered, on average, an increase of €300 in their payments. The Euribor continues to rise, and a measure to deal with it is gaining more and more Luxembourg Email List strength: early amortization. Below we will tell you how the rise in the Euribor benefits amortizing your mortgage .Find the best mortgage without mistakes
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The rise in the Euribor and its effect on your mortgage
The ECB's interest rate hike began in July 2022 as a measure to combat inflation, and has not stopped since. The evolution of the Euribor is parallel to that of the ECB rates, and thus both reached a record figure in June: 4% .
Recommended reading: Euribor in 2024: what is the forecast?
How it benefits you to pay off your mortgage early
To understand why the rise in the Euribor benefits amortizing your mortgage, you must understand the way in which your mortgage is amortized.
Interest is calculated from the debt pending amortization. Therefore, to the question of when is the best time to pay off a mortgage , the answer is: at the beginning. Because that is when the outstanding debt is highest, and also, therefore, when the interest is highest. By repaying early you reduce the outstanding debt and, with it, the interest.
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Why the rise in the Euribor makes early amortization beneficial
As you can see, the benefit of paying off your mortgage early is saving interest. If the rise in the Euribor implies a rise in interest, it is easy to see why it benefits you to amortize your mortgage in the current situation , right?
The issue is amortizing when the interest burden is high . In any variable mortgage, this will always happen at the beginning, but remember that what you pay in interest depends on two factors: the outstanding debt and the interest rate. Even if the debt is not very high, that is, even if you have been paying your mortgage for a long time, if the interest rate is very high, it is just as convenient to amortize it.
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