Each time a consumer decides to repay home loans, this option is not free of charge: there will be a commission charged by the bank. The key question is whether the decrease in the monthly installment pays off against the charges that have to be paid. Still, there are maximum values set by law that differ depending on the interest rate contracted on the loan. We did the calculations for you: learn how to save hundreds of dollars a month.
Depreciation of mortgage is primarily to settle the outstanding amount in full (full repayment) or only part of that amount (partial repayment), prior to the expected expiration date of the credit agreement.
It is true that repayments are made every month which, for all intents and purposes, are like repaying mortgage loans, as the total loan amount (called MTIC) decreases. However, this repayment to which we refer is an extra to the monthly installment which will allow you to accelerate the payment of the requested financing. So let’s see how you can do it and how much it might cost you.
When does the full or partial refund pay off?
Amortization of an outstanding amount, particularly in mortgage loans, should not be an impulse decision. It’s important to do the math and figure out when you can or can’t make up.
Firstly, you should be aware that repayment is not free of charge, which means that you should consider repaying mortgage loans if the amount to be repaid is large. Otherwise you will pay the amortization fees and your monthly installment will change little or nothing.
We therefore suggest that if you find yourself in a more difficult financial situation and are having difficulty paying the monthly installments of your home loan, you might consider transferring your credit. By switching banks, you can benefit from a lower spread and be exempt from paying early repayment fees.
How to write off mortgage loans?
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To repay home loans you should always notify your financial institution. However, you should be aware of the dates you have to meet before you can repay, as these may vary between banks (see your loan agreement for this purpose).
Partial early amortization
In the case of partial early repayment, credit institutions usually do not set a minimum repayment amount. You should only notify the organization at least seven business days in advance. In this type of amortization, this should match the payment date of the monthly installment of the customer.
Full early amortization
Within the total early amortization, there are two deadlines to be met in two different situations.
On the one hand, if a consumer willingly and willingly repays the loan in full, he must notify the bank seven working days in advance, coinciding with the date of repayment precisely with the payment date of the monthly installment.
But if, on the other hand, the repayment derives from the sale of the home, the customer must notify the institution with 10 working days’ notice so that the mortgage can be issued (ie the document that extinguishes the homeowner’s debt). mortgages) which shall subsequently be presented on the date of the deed.
How much does it cost to repay home loans?
If you plan to repay home loans, you should know and measure the costs associated with this option.
Note that the amount of the amortization commission may vary between financial institutions and between the type of interest rate contracted – fixed or variable – but there is a ceiling to retain:
- In credit agreements with a variable interest rate, the amortization rate may not exceed 0.5% of the principal repaid;
- In contracts with a fixed interest rate, the commission cannot exceed 2% of the repaid capital.
If early repayment is made on the grounds of unemployment, professional travel or death of one of the loan holders, the consumer is exempt from paying this commission.
Imagine the case of Donna Anne and Mr Zei: both in their 50s, with steady jobs and a mortgage loan that they have been paying for 20 years. At the time, the property cost 210 thousand dollars and applied for a loan with variable interest rate 30 years.
Currently, the interest rate (spread + EURIBOR index) of their loan is 2% and the couple pay a monthly installment of 776.20 dollars. After receiving compensation of $ 20,000, they considered repaying their loan. Then they did the math.
With the 20 thousand dollars and with a variable interest rate, the couple would have to pay 100 dollars of amortization commission. Although the commission seems high, the couple would now be paying a monthly installment of 592.17 dollars: minus 184 dollars a month.
What other options are there to invest?
On the one hand, you can repay home loans, but on the other you might consider other options.
If your monthly repayment with this loan does not weigh on your effort rate and if the amount to be repaid is not that high, why not bet on an emergency fund (which all Portuguese should have for any unforeseen circumstances) or even a deposit. in the long run that can give you some return?
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Depreciating mortgage is a decision that should be considered on a case by case basis. This is because you have not only considered the interest rate of the property loan, but also make the accounts for the amount you will have to pay for the amortization commission. Then you should also Annelyze the monthly amount you will pay less with the partial early repayment.
If you only pay a few dollars a month, you may be able to pay for banking products that will give you some return, or even for a PPR. Ultimately, the decision is always yours, so we suggest you do the math to make a better decision.