The economic crisis caused by the pandemic is taking its toll on many families and has disrupted everyone’s plans, but there are also many who, due to their broken plans, find themselves with unexpected savings from vacations they have not enjoyed or leisure expenses they have not been able to make.
So the best way to allocate savings is to end the debts because really if you owe money that savings is strictly not yours. Of all the debts without a doubt the biggest and longest lasting is the mortgage and many will think that the best thing to do is to use the savings to amortize it.
Is it worth amortizing?
It is not such a simple question to answer because if in principle it is a good idea, there are several conditions that may lead us to recommend using the money for other investments.
First of all, if your mortgage is prior to December 31, 2012 in that case, yes. Always amortize since you have the advantage of the tax deduction. There is a deductible limit of 15% on 9,040 euros, which limits the maximum deduction to 1,356 euros.
If your mortgage is later you should take into account these points.
Amortization fees. Your mortgage may have an early amortization fee and this must be taken into account when making the calculations, generally partial amortizations have no cost up to a certain amount. Check the conditions of your contract.
The conditions of your mortgage. If you have a variable mortgage with a differential below 0.5% it is possible that even the bank is paying you interest and if it is not, it should. In that case the early amortization would not make sense financially speaking although another aspect would be the psychological one since many people sleep better having less debt.
Investment alternatives. Currently banks do not give you anything for your money, some even charge you for your deposits but fortunately there are banks that are entering Spain and offer you up to 1% for your money, for example Renault Bank or Myinvestor.
The time you have left to pay the mortgage. In general it is more convenient to amortize the mortgage in the first years as this is when you pay more interest, this is especially important in very long mortgages and with a high rate (especially fixed rate mortgages).
Personal situation: Will you need that money in the future? Do you have any more urgent savings? Is the money burning in your hand? Each person knows his or her weaknesses and should take them into account.
Whatever you do, the important thing is that you have been able to save and you should treat that money as if it were not yours because at the end of the day you have a large debt to pay over the next few years.
Translated with www.DeepL.com/Translator (free version)