Structured Mortgage

A structured mortgage is a mortgage loan that is divided into multiple tranches or components, each with different terms, interest rates, or repayment schedules, allowing the borrower to tailor the loan to their financial needs. It often combines fixed-rate and variable-rate portions within a single mortgage facility. This structure provides flexibility in managing interest rate risk and cash flow over the life of the loan.

Main Info

This section determines the amount, term, down payment Down payment is an initial up-front partial payment for the purchase of items/services, such as a car or a house., disbursement Payment or distribution of funds from an insurance company to a policyholder, beneficiary, or a third party, in accordance with the terms and conditions specified in the insurance policy., codebtors Individual who assumes joint responsibility for repaying a loan alongside the primary borrower. If the primary borrower defaults on the loan, the codebtor becomes liable for the remaining debt., refinancing Taking out a new loan to replace an existing loan, usually to obtain more favorable loan terms, such as a lower interest rate, extended repayment period, or different monthly payment amounts., and restructuring Modifying the original terms and conditions of the loan to provide a more affordable repayment plan, typically when a borrower is facing financial difficulties or is struggling to meet their loan obligations. Can provide relief in the form of lower interest rates, extended repayment periods, deferred payments, changes in payment frequency, debt consolidation, waiving of penalties or fees, partial write-offs, etc. characteristics of the loan.

Parameter	Description	Default
Loan amount and loan term	up to - Sets the maximum amount that can be loaned in the specified currency. from ... to - Sets a range for the amount that can be loaned in the specified currency. with a term of ... to - Sets a time range for the loan repayment in either months or years. E.g.: Loan amount from 1,000 to 10,000 Euro with a term of 1 to 5 years.
Down Payment	Percentage - Sets a fixed percentage of the loan amount that must be paid up-front. Minimum and Maximum Percentage - Defines an acceptable range for the down payment (e.g., 10% to 30%), allowing flexibility based on customer profile or asset characteristics. Based on formula - Calculates the down payment dynamically using product formulas or data sets, enabling risk-based or conditional down payment requirements.
Disbursement	Allows only one disbursement - The borrower receives the loan amount in full in a single installment. Allows up to ... disbursements - The borrower receives the loan amount in multiple installments, up to a fixed limit. Allows unlimited disbursements - The borrower receives the funds as needed, without a set limit on the number of disbursements, up to the total loan amount. Is autodisbursed - Once the loan is approved, the loan amount is transferred to the borrower's bank account automatically. Is not autodisbursed - Once the loan is approved, the borrower must request the transfer of the loan amount.
Codebtors	Allows unlimited - There is no limit on the number of codebtors that can guarantee the repayment. Allows up to - There is a specified maximum number of codebtors allowed. Does not allow - No codebtors are allowed. E.g.: Allows up to 2 codebtors.	Allows unlimited codebtors.
Refinancing	Allows - The loan can be refinanced. Does not allow - The loan cannot be refinanced.	Allows refinancing.
Restructuring	Allows - The loan can be restructured. Does not allow - The loan cannot be restructured.	Allows restructuring.

 

Interest

The interest sets up the amount of money (which is distinct from the principal repayments) that the borrower pays as a cost for borrowing money when repaying the loan. You can set up both regular and penalty interests Additional interest charged when a borrower fails to make timely payments on a loan (misses a payment deadline or makes a payment that is less than the agreed-upon amount)., with interest rates The interest rate is the amount a lender charges a borrower and is a percentage of the principal (i.e., the amount loaned). that are fixed, variable or based on a formula.

Parameter	Description
Interest	Click + Add interest to set up an interest for the loan based on the desired interest rate(s). fixed - Sets an interest rate that is a fixed percentage of the principal amount, regardless of changes in the market interest rates. variable - Sets an interest rate based on an underlying benchmark interest rate plus a specified percentage margin. based on formula - Allows you to set interest rates based on Product Formulas. for the first / for - Applies the interest rate for a specified number of installments Regular payment that a borrower is required to make to the lender to repay a loan over time.. until end - Applies the interest rate until the end of the loan term. until date - Applies the interest rate until a fixed date. Must be a future date (cannot be in the past at product configuration level), and greater than the product's start date. E.g.: Interest is fixed at 5% for the first 6 installments and then variable indexed to EURIBOR 3M with a margin of 1% until end. NOTE   If you define multiple interests, the user will have the option to select one of them during the application.
Penalty	Click + Add penalty to set up a penalty interest for the loan and the reference value it is applied to (principal, interest, front end fee, etc.). fixed - Sets an interest rate that is a fixed percentage of the reference value. based on formula - Set an interest rate based on Product Formulas that is applied to the reference value. E.g.: Penalty is 1.5% from Loan Interest. NOTE   If you define multiple penalty interests, all will be applied. For instance, if you set up a 1.5% penalty from interest and a 1% penalty from principal, the borrower will pay both when missing a payment. You can select multiple reference values in the same penalty interest, e.g.: Penalty is 2% from Loan Principal, Loan Interest. This will apply a 2% interest to both the loan principal and loan interest. Once you set up a penalty interest based on a reference value, you cannot reuse that reference value in another penalty interest. E.g.: If you set up a penalty interest as a percentage of the principal, you cannot create another penalty interest that is also based on the principal. Selecting the General reference value cumulates all the other available reference values, therefore it is mutually exclusive with them. If you create a penalty interest based on the General reference value, you cannot create any other penalty interests. Likewise, if you create a penalty interest based on another reference value, you can no longer create a penalty interest based on the General reference value.

Fees

To set up a fee Fees are charges and costs that customers have to pay for specific services and transactions, such as processing a loan application, ongoing support, early repayment, or account maintenance. Fees differ from the main costs of a loan or insurance (the loan's principal/interest or the insurance's premium) in that they typically cover operational expenses and are not related to the loaned/insured amount. for your product:

1. Click +Add fee.
2. Select a predefined type of fee from the list, or click Create new to define a new fee type (you can also rename an existing fee by clicking the fee name). The type of fee determines parameters such as the conditions under which the fee is applied, how often the fee is charged, whether the fee is refundable or not, etc. For more information, see Fee Types.
3. Enter the amount of the fee:
   • value - a fixed value in the specified currency.
   • percentage - a specified percentage of the remaining value, financed value, paid value, unused amount, used amount, overdraft limit amount, amount, etc.
   • based on formula - Allows you to set fees based on Product Formulas.
4. If the fee type has a recurring periodicity (e.g., monthly, annual, weekly), you can configure different amounts for specific installment ranges. For example, you may define a fixed amount for the first three installments, a variable amount for the next six installments, and a formula-based amount for the remaining installments.
   E.g.: Down Payment Fee is based on formula Down Payment * 0.002 for the first 3 installments and then based on formula Down Payment * 0.001 for 3 installments and then value 0 € until end.
   Fee types with the periodicity set to Once are automatically configured to be charged a single time.

You can set up multiple fees that will be charged independently, based on their Fee Types. E.g.:

• Front-end Fee is 25 € one time.
• Repayment Fee is 4% over remaining value one time.

This will always charge the borrower a $25 fee on loan application. If, during the loan, the borrower decides to repay the loan in advance, a 4% fee is charged over the loan's remaining value.

Insurance

Insurance is required for borrowers that meet certain risk criteria, in order to cover the potential losses if they default on the loan.

To set up an insurance for your product:

1. Click +Add insurance.
2. Select the Bancassurance Classes (e.g.: Credit Insurance, Life Insurance, Home Insurance or Other Insurance).
3. Select the periodicity for the insurance premium, e.g.: 30 Days, Once, Monthly, Weekly, Trimestrial, or Annual.
4. Select the amount to insure:
   • value - A fixed amount in the specified currency.
   • percentage - A specified percentage of either the remaining value, financed value, payed value, unused amount, used amount, overdraft limit amount, or amount.
   • based on formula - Allows you to set the insurance amount based on Product Formulas.
5. Select when the insurance should be issued based on the value of a specified Lexicon Term.

You can set up multiple insurances that will be issued independently, depending on whether they meet the issuance condition. E.g.:

• Life insurance paid monthly of 100% over remaining value when Age is over 60 Years Old.
• Other Insurance paid once of 50% over financed value when In BlackList is In BlackList.

This will issue a monthly insurance over the remaining loan value if the applicant is older than 60.

If the applicant is marked as In BlackList, which is a boolean lexicon term, an insurance of 50% over the financed value is issued when extending the loan.

Repayment

The Repayment section determines the periodicity and repayment schedule for the loan's installments Regular payment that a borrower is required to make to the lender to repay a loan over time., and how the repayments are impacted by holiday shifts Adjustment of installment due dates that coincide with public holidays by moving the due date to the last working day prior or first working day after the holiday. and grace periods A specified period of time during which a borrower is not required to make regular loan payments without incurring late fees or penalties. Typically granted immediately after the loan disbursement or before the start of the regular repayment schedule..

Parameter	Description
Repayment	Sets up the periodicity and schedule type of the repayment. performed on - Determines the frequency of installments based on Loan Periodicity. equal/decreasing - Determines if the installments are equal (by adjusting the principal to keep the sum between principal and interest constant on each installment) or decreasing (by repaying the same principal on every installment and having the interest decrease over time along with the outstanding principal). with schedule - Determines the repayment schedule, based on the Payment Schedule Type. with interest only up to … installments - Defines the number of installments at the start of the loan term during which only interest is charged and the principal balance remains unchanged. E.g.: Repayment is performed on monthly in equal installments with schedule Equal Installment Monthly 365_TLU. NOTE   When generating a repayment schedule, the default calculation precision for determining the remaining balance of each installment is set to 10 decimal places (rounded to 2 decimals in the final payment schedule). You can customize this precision between 2 and 28 decimal places by configuring the PricingRoundingDecimals key within the kv/<environment name>/mkexp-pfai/app-settings directory in the Configuration Manager. NOTE   You can add multiple repayment schedules that the applicant can choose from by clicking +Add repayment repeatedly.
Holiday Shift	Determines what happens if an installment's due date overlaps a public holiday. forward - Change the due date to the next working day after the holiday. backward - Change the due date to the last working day before the holiday. country - Select the country or countries used as reference for the public holidays calendar. defer due date - The payment amount is calculated based on the normal due date, even if the actual due date is shifted.
Grace Period	Determines what expenses are exempted during the grace period and how long the grace period is. interest - Borrower is exempt from repaying the interest. principal - Borrower is exempt from repaying the principal. both - Borrower is exempt from paying both the principal and the interest. installments - The number of installments that the grace period covers. E.g.: Grace period interest 2 installments.

Facility Structure

The Facility Structure section defines how the loan facility is organized, including the number of tranches, their relationship (single account or linked sub-accounts), and the individual terms governing each tranche.

1. The booking model defines how the loan and its tranches are recorded in the core banking system, specifying whether they are booked as a single account or as linked sub-accounts under the parent facility:

   • single account: A single loan account that represents the entire tranched loan facility as one unified record. All tranches are managed under this one account, with the overall loan balance, disbursements, and repayments tracked centrally, even though the loan may be split into tranches with different terms (e.g., fixed vs. variable rate, different maturities).

   • linked sub-accounts: Separate accounts created for each individual tranche within the tranched loan, all linked back to the parent loan account. Each sub-account carries its own interest rate, repayment schedule, balance, and maturity date, while remaining formally associated with the master facility.

2. Click Add tranche and set the amount as:

   • percentage from ... up to: The tranche amount is calculated as a share of the total facility value (e.g., 30%–50% of the approved loan), adjusting automatically if the facility amount changes.

   • fixed amount from ... up to: The tranche amount is set as an absolute monetary value within a defined range (e.g., €50,000–€100,000), independent of the total facility size.

3. Specify the number of installments for which the interest only part is applied.

4. Set whether the installments are released:

   • in advance: Installments are due at the beginning of each payment period, meaning the borrower pays before the period to which the payment applies.

   • arrears: Installments are due at the end of each payment period, meaning the borrower pays after the period in which the interest has accrued.

5. Set the number of covenants required for release:

   • all: Every defined covenant must be satisfied before the tranche installment can be released, ensuring full compliance with all conditions.

   • at least one: Only one of the defined covenants needs to be met for the tranche installment to be released, offering more flexibility in triggering disbursement.

The maximum number of tranches is configurable, from 1 to 10 (per stage). A typical drawdown plan contains 4 to 8 tranches.

Discounts

In the Discounts section, you can define discounts on any of the already configured interest items, commission items, or on all pricing elements.

There are three ways to create discounts:

1. Follow the sentence-based interface to configure a condition based on a dictionary attribute (e.g., Age >18), for which you define a discount. Note that you can also create new attributes, extending your dictionary (+Add discount > Create New).
2. Add a Dataset based on one, two, or more attributes for a pricing item. You can add more data sets, one for each pricing item. For more details on how to create Data Sets, see Product Data Sets.
3. Add a formula to define discounts with more advanced conditions based on mathematical expressions, data sets, and other inputs. You can add more formulas, one for each pricing item. For more details on how to create formulas in Product Designer, see Product Formulas.

Collateral

You can determine the collateral An asset or property that the borrower pledges to the lender as security for the repayment of a loan, giving the lender the right to take ownership of the pledged asset in the event of default. cover used to secure a loan as a percentage of the loaned value. For example, a collateral cover of 25% indicates that the applicant must provide collateral in the amount of at least 25% of the loan amount.

1. Add the desired loan percentage in the Collateral cover field. Select the allows partial release option if you wish to allow the partial release A partial release of collateral means that if the borrower has met specific requirements or paid off a portion of the loan, the lender may release a part of the collateral while still holding the remaining part as security. of collateral once certain conditions are met.
   Once the collateral cover is set, the +Add guarantee button is enabled.
2. To configure the guarantees Specific asset used to secure a loan as part of the collateral coverage. that are part of the collateral, click +Add guarante. Select one of the available guarantees, and add the maximum accepted coverage as a percentage.
3. Add multiple guarantees, as needed.

Underwriting

The Underwriting Module lets users define and manage underwriting rules that assess product eligibility and risk. Rules are built from lexicon terms — inputs, datasets, and formulas — and each rule is used in underwriting, eligibility (knock-out) checks, or both. They also help determine whether or not a manual approval process is required (available only for rules based on Product Data Sets).

Categories

Categories let you organize your underwriting rules into named groups so you can manage and evaluate them more easily. The default categories are:

• KYC/KYB (Identity & Verification) — identity verification via official documents / trusted data sources (ID/passport, address, biometric or digital identity), including customer due diligence and screening.

• Financial Crime (AML & Fraud) — fraud / financial-crime risk assessment: sanctions and PEP screening, AML risk scoring, and suspicious-pattern detection across profiles, funding sources, and transactions.

15 further predefined categories are available when you click Add Category: Credit Risk, Financial Profile, Affordability & Capacity, Employment & Stability, Collateral & Guarantees, Product-Specific Constraints, Legal & Compliance, Behavioral Risk, Risk Profile, Insured Object Risk, Medical / Health Risk, Geographical Risk, Coverage & Policy Constraints, Claims History, Distribution / Channel Rules.

You can also create custom categories, which let you group underwriting rules under a label that matches your specific business logic — for example, if none of the 15 predefined categories fit a set of rules unique to your product or market. Click New Category, and fill in the Category Name and Description.

Product Rules

Product rules are the default, uncategorized group — any underwriting rule that hasn't been assigned to a specific category lives under Product Rules, and you can move a rule back there at any time to un-categorize it.

Derogation Rules

A derogation rule lets you send a rejected underwriting rule to manual review instead of automatically rejecting the application. This adds a third possible outcome — Derogation — alongside Approved and Rejected.

Configuration:

• While editing a rule, click referred by to attach a derogation

• Choose the derogation type: Add rule, Add Data Set, or Add Formula

• The derogation appears as an indented child statement under its parent rule

• The parent rule cannot be saved until the derogation is fully configured.

Constraints:

• Each rule can have only one derogation

• Data Set rules cannot have a derogation

• A derogation has no category, alias, or code

• Derogations cannot be nested — a derogation cannot have its own derogation

• A lexicon term used as a main rule can also be reused inside a derogation

Create Rules

Regardless of category, to create a rule, click the + sign next to the desired insured object or coverage and select one of the following options:

• Add Rule - Follow the sentence-based interface to configure a condition based on a Lexicon Term (e.g. Credit Rating is Good or Excellent).
  HINT  
  In the attributes' pop-up window, you can click +New Attribute to quickly add a new lexicon term or Product Settings to edit the current lexicon term.
• Add Formula - Use Product Formulas that return a boolean result ("True" for approval and "False" for rejection);
• Add Data Set - Use Product Data Sets for the evaluation. This is mandatory if the rule can return an outcome where the application must go through a manual approval process. The data set can return only the Approved, Derrogation, or Rejected results (or an equivalent terminology defined in the Underwriting Data Set Values, e.g. Passed, Manual Analysis, or Not Passed).

  

For each rule, you can optionally set an alias — a display name that replaces the underlying lexicon term in the UI — or a code — a unique identifier for referencing the rule in integrations, reports, or external systems.

For each rule, you can select the used in eligibility option to mark it as a knock-out rule, which automatically disqualifies the applicant if its condition is not met. Otherwise, the rule is submitted to the final approval review.

For the manual approval result, you need to configure the journey to direct the application to a back-office manual approval process. If you are using Multi-Dimensional Data Sets based on cascading data sets, the manual approval outcome must be defined in the top-level data set.

Documents

Specify the document types required from the applicants (and/or others involved in the origination process, e.g. codebtors Individual who assumes joint responsibility for repaying a loan alongside the primary borrower. If the primary borrower defaults on the loan, the codebtor becomes liable for the remaining debt.), as well as the document types provided to the applicants.

Parameter	Description
Required from customer	Documents that the applicant must provide in order to verify identity, income, product eligibility, etc. To add a required document: Click +Add document. Select the desired type of document. Choose if the document is mandatory for applicant and/or mandatory for co-debtor. E.g.: Income statement mandatory for debtor and mandatory for co-debtor.
Provided to customer	Documents that must be provided to the applicant typically in order to obtain an agreement and/or signature. To add a provided document: Click +Add document. Select the desired type of document. Choose if the document is: static: available for download during the journey in their original form, such as "General terms & conditions". This will prompt you to upload a document file. generated: based on templates with specific tokens (the document templates must be previously configured using the Digital Documents Processor). This will prompt you to select a digital document template. Choose if the document requires signature and/or requires accord. E.g.: Terms and conditions is static requires accord and requires signature.

Service

The Service section is used to define the configuration structure and characteristics of your banking product. The following options are available:

• Commission on unused amount: The number of months after which the system starts calculating commissions for any unused amount.
• Disbursement allowed: The number of months for disbursing funds to the borrower.
• Minimum principal for early repayment: Minimal principal allowed for early repayment.

Once you’ve configured all the fields, change the status from Draft to Approved to save your Mortgage product. For details on versions, see Product Life Cycle and Replication.

Below you can check a real-life example of how a Mortgage product is built in Product Designer.