Mortgage loan overpayment – is it always worth it? When does it make sense?

Mortgage loan overpayment – is it always worth it? When does it make sense?

January 20, 2020 Off By Ellen Billman

A mortgage is a big financial baggage for your home budget. That is why, for a reason, everyone who has a liability and some savings put aside faces the dilemma of its early repayment. However, will it always be profitable to overpay the mortgage? How to check?

Mortgage overpayment – where to start?

Mortgage overpayment - where to start?

We will emphasize at the outset that the answer to this question is not clear. Overpayment of a mortgage means paying more than required by the monthly installment set in the repayment schedule. Therefore, by overpaying the commitment, the borrower reduces the overall amount to be repaid. Therefore, it reduces capital installments and interest rates – which results in lower installments.

However, overpayment of the mortgage depends primarily on the payer’s experience in saving skills. In addition, the repayment terms of the loan itself, which are included in the loan agreement, are an important issue. In many cases, banks charge an additional commission of approx. 1-2% for earlier loan overpayment. capital value. Why is this happening? This is mainly due to the need to recalculate the liability or to set a new installment schedule. In practice, this means that it is worth checking how high the commission should be paid before you decide on an overpayment so that you can enjoy settling your mortgage early.

How to apply for a mortgage overpayment?

How to apply for a mortgage overpayment?

The first step for the borrower is to submit an appropriate inquiry to the bank, asking them to present the terms with early repayment or overpayment of the loan. The institution has 7 days to pass on specific costs to be borne by the client if they decide to do so.

Loan overpayment and earlier repayment – find out the difference!

We talk about the overpayment of a loan when:

  • The bank will receive more than the repayment schedule anticipates – eg when, once every six months, the borrower transfers the installment to the bank’s account twice, ie instead of twelve installments, it repays fourteen
  • Overpayment of a loan can be done in two ways: regularly and once – the right is granted to the customer of any bank!

Early mortgage repayment:

  • It is regulated under the Consumer Credit Act of 12/05/2011, according to which for a liability of up to USD 255,500 – the borrower for an early cash return will not pay a single dollar. There is only one condition – the borrowed money cannot be used to buy real estate!