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Which mortgage loan repayment system is used in Peru?

If you are canceling a home loan, or plan to make an application for one, you should know what the home loan repayment system is. This information will help you to better evaluate the options available whenever you cancel this credit beforehand.

What is a home loan repayment system?

The repayment system is the way in which the particular payment of a loan is made during the established term. Within the particular case of a home loan, it determines the way funds, interest, insurance and other associated administrative expenses are terminated.

There are primary amortization systems, namely:

  • French or Set Fee System: the pay back rate is constant for the whole period of the loan (in loans at a fixed attention rate). The proportion from the payment dedicated to capital is usually low at the beginning, and it improves progressively in each transaction.
  • German or even Fixed Amortization System: amortizes capital constantly.
  • American or Payment Program at the End of Term: interest will be amortized exclusively, with the transaction of capital remaining solely in the last installment.
  • If you are canceling a mortgage, or plan to apply for a single, you should know what the mortgage loan pay back system is. This information will allow you to much better evaluate the options available when you terminate this credit in advance.

What is the amount system used in Peru?

Peruvian financing institutions make use of the French Amortization System within their mortgage loans. This is not accidental, because the aforementioned method of amortization is among the most used for mortgage loans worldwide.

That is why when you evaluate your payment schedule in more detail, you notice that in the preliminary installments of the credit, the particular payment made is basically focused on amortizing capital. But since payments go by, capital amount increases while the amount covered interest decreases.

Another characteristic of this transaction system is that the amount of the particular installment remains constant through the entire terms, provided that the credit score is at a fixed interest rate.

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