It is worth knowing that any loan, including the mortgage, can be repaid ahead of schedule. If you have a surplus of money and want to get rid of your burden, consider all the pros and cons of repaying your home loan early. See http://speedskating.org/things-you-have-to-know-before-filing-bankruptcy/ for the scoop
Can you pay off the loan ahead of schedule
First of all: there are no banks that would prohibit or impede early repayment of a mortgage. Although some of them charge an additional fee for this option – a commission, but it usually accounts for 1-2 percent. overpaid amount. For example: if you overpay $ 100,000, the bank will charge you between $ 1 and 2 thousand for early repayment. Of course, you should carefully read your own contract to see if there are any other provisions regarding penalty fees in the event of overpayment. Secondly, remember that an earlier repayment makes sense in the early repayment period, because in the final repayment period the installment consists mainly of capital and the interest is low. The overpayment is then practically irrelevant to the cost of the loan.
Why repay the loan earlier?
Earlier repayment of the housing loan means a lower loan installment or shortening the loan period, which of course has an impact on reducing the interest we have to pay the bank. If you are determined to take this step and have made sure after a conversation with a bank consultant that you meet all the requirements that are favorable for you, a few days before the planned repayment, go to the bank to make an appropriate order for early repayment. The bank will then collect the declared amount from your account and use it to pay off the loan. It is important to let you know which repayment option you have chosen, otherwise it may decide itself, which may not always be beneficial for you.
What are the fees for early repayment of the loan
The fees usually apply only to people who decide to repay the loan within the first 3-5 years of taking it. However, even during this period, some institutions allow the possibility of partial overpayment at no cost, provided that the amount overpaid does not exceed, for example, 30 percent of the loan granted. If you want to make a relatively small overpayment, you may not incur any additional costs. You can consider the loan overpayment period when, for example, a 3-year period ends, when the bank charges a fee for early repayment. It is sometimes worth waiting up to several months, because the benefits of lower interest may be less than the fee for early repayment. It is necessary to calculate the amount of interest during the period of delaying the overpayment and compare it with the commission for this activity.
What to do in the case of a foreign currency loan
If you repay a foreign currency loan, you must take into account that the amount of the debt balance in $ is strictly dependent on the current currency exchange rate of the loan against Polish money. Remember that the generally accepted rule is that the loan is overpaid when the foreign currency exchange rate is low. Example: if the cost of the Swiss franc is $ 3.40, paying 50,000 zlotys, you will overpay about 14,000 700 dollars. If the rate fell to $ 3.00, then the same $ 50,000 equals 16,000 666 dollars.
What “for” and “against” should be considered before making a decision
Remember that although earlier repayment brings the benefits of a lower cost of credit over the entire repayment period, you should think very well about the pros and cons of making an overpayment decision. If you have free funds, this will definitely be a good option for you. If you’re wondering whether to spend all your savings on repayment, your bank’s financial advisor will strongly advise you against making this decision. This will reduce your financial security, which may cause, for example, in the event of temporary loss of job or illness that you are deprived of funds to pay installments. If you have considered the possibility of placing savings (e.g. fund, stock exchange, deposit) in order to use the money obtained in this way for paying off credit interest, remember that an increase in the expected rate of return is tantamount to an increase in the risk level of such an investment. Therefore, risk leads to rethinking this decision.