The acceptance of an offer of mortgage loan assumes the commitment to repay the borrowed capital, as well as interest and ancillary costs throughout the duration of the credit, according to pre-defined deadlines. However, it is possible to make an early repayment of outstanding capital, in whole or in part, in order to reduce the cost of the mortgage. What does this imply for the borrower and what are the terms of an early repayment? Point. see for more notes

Early repayment of mortgage loan in a brief

Any borrower is free to make an early repayment of his mortgage, ie to repay the outstanding capital, in whole or in part, before the end date of loan initially planned.

Most banks, however, charge early redemption fees.

These fees are not mandatory and it is therefore up to each bank to choose whether to apply them or not. As such, it is usually possible to negotiate with his bank when subscribing to the loan offer.

In all cases, these prepayment charges of real estate credit must clearly and explicitly appear on the loan agreement. Regulated, it can not also exceed 3% of the outstanding capital or, depending on the case, six months of interest of the sums remaining to be repaid at the rate fixed for the credit.

On the other hand, it should be noted that certain mortgage loan agreements may provide for a prohibition of early repayment, for example when the partial repayment is less than or equal to 10% of the borrowed capital.

Example of early repayment of a home loan

home loan

For a property loan of € 150,000 subscribed in 2013 at a rate of 3%, with the capital remaining to be repaid of € 107,855.
If the prepayment is total, the reimbursement allowances will amount to € 1,617.82, which is the smallest amount of the two existing methods of calculation:
107 855 x 6 x 3/100 / 12 = 1617.82 €
107 855 x 3/100 = 3235.65 €
If the prepayment is partial, up to € 40,000, the fees will be € 600, the smallest of the two amounts from the following calculations:
107 855 x 3/100 = 3,235.65 €
40,000 x 6 x 3/100 / 12 = 600 €

What there is to know

In the case of adjustable-rate mortgages, the average rate applied since the beginning of the repayment of the credit is usually used to determine the prepayment charges.

On the other hand, it is important to know that the early repayment date affects the calculation of any additional interest payable.

It is therefore recommended to make an early repayment, whether total or partial, on the day of payment of the due date, in order to avoid paying any additional interest. In the opposite case, so-called interim interest will be added, ie interest calculated over the period between the early repayment and the maturity initially stipulated in the contract.

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