If you pay your mortgage early, you can pay up to 5% commission. Fortunately, such costs usually disappear after three or five years. The exception is Good Finance, which requires full repayment throughout the loan period.
However, the commission can be avoided by making a partial repayment, which is payable only in the first two years. Nothing prevents it from covering e.g. 99% of the debt.
An offer for the patient. Wait for the change of currency!
When choosing a mortgage, the option of early repayment is rarely a key consideration. As a rule, bank customers assume that a house or flat will be bought once and for all. In the meantime, it often turns out that the house needs to be changed to another, flat for the house or you need to move to another city. The issue of early loan repayment then arises.
For a bank, this is not a good deal – financial institutions mainly live off the interest, and the customer paying off the entire loan earlier deprives them of their earnings. To compensate for this risk, banks usually apply fees – commissions for early repayment of a mortgage, both partial and one that will completely eliminate our liability. It is worth adding that in the case of a consumer loan (up to USD 80,000), such a fee cannot be charged.
You can read in the loan agreement or table of fees and commissions about whether and what fees the bank will charge us when paying back the mortgage. The latter solution is less favorable for the customer because the bank can change the table at any time. The customer must agree to the contract change.
Where no commission?
The E-Money has analyzed the banks’ offer in terms of commissions charged for earlier and partial mortgage repayment.
The situation is similar when it comes to partial loan repayments, although there are a few exceptions. For example, in the bank Good Finance instead of 1.5% as in the case of total repayment, this time the bank will count only 0.5%. At Good Credit, if the total repayment amount does not exceed 30% of the loan amount granted, the bank will not charge a fee.
Fortunately, banks after several years of paying back installments give up charging for early repayment. The sum of interest collected during this time is sufficient for them to give up the commission.
The exception is Good Finance, which charges the total repayment fee throughout the loan period. However, it can be avoided because the partial repayment fee is only calculated for 2 years. It is enough to make a partial repayment on e.g. 99% of the debt.
Is it worth it?
A growing number of customers are deciding to pay back the loan early. A certain percentage are those who want to get rid of their property, which involves repayment of the existing loan.
The option of early repayment can also be used to improve your financial efficiency. This may be a good opportunity for those who took out mortgages a few years ago when the margins were higher than at present and the variable part of interest rates definitely exceeded the current level. It’s worth refinancing such a loan – paying off your existing liabilities by taking out a new, cheaper loan in another bank.
This option also allows us to finance – if necessary – commission for early repayment, charged by the bank. Sample 6,000 USD commission can already be included in the new loan and spread the sum over the next years of repayment.
Early repayment may be less profitable for those who have incurred their obligations in foreign currencies. The current level of the Swiss franc exchange rate (3.17 USD) is much higher than in 2007-2008 when it was less than 2.2 USD. As a result, the value of debt expressed in USD maybe even higher than the loan amount paid out. For example, if the loan was taken at a rate of 2.20 USD and its amount was 300 thousand. USD, the current value of debt may exceed 400 thousand. USD.