The premature repayment of a mortgage incurs costs: the penalties provided for in the loan contract, but also, the application fees and the costs of mortgage release, if the bank has guaranteed the credit through this. However, certain situations can make this financial transaction advantageous if the true cost of a loan is calculated. Explanations:
What is the weight of the prepayment indemnities (IRA)?
A sudden return of money allows you to repay your credit before its term. If this idea seems immediately attractive, you must already ensure that it is possible, by studying the conditions provided for the loan contract. Certain contracts may refuse this transaction, in particular if the amount paid is less than or equal to 10% of the amount borrowed.
Then, what early redemption indemnities (IRA) did you negotiate at the signing? Without intervention on this point, they are proposed at the ceiling, namely at 1 semester of interest at the average rate of the credit excluding insurance contribution, within the limit of 3% of the capital remaining due
Can prepaying a loan be beneficial?
Because of the costs inherent in the operation, the early repayment of the credit is a costly process, which requires, most of the time, to continue the loan, as expected, until its term.
However, when interest rates are high, this merits closer study, since the rate of inflation is then significantly lower than the rate of credit. As an indication, the difference between these two rates must be at least 1% for the transaction to be attractive.
In the same vein, if the remaining term of the loan is greater than that already elapsed, the costs are likely to be offset.
In addition, there are certain situations where exemption from these penalties is possible: sale of housing, professional transfer, dismissal, zero rate loan, employer loan, variable rate credit, etc.
In other words, you must take into account the weight of the IRA of your contract, but also the advantages of placing your money, while continuing to repay your loan normally. As well as at the end of interest tax reductions, in the event of early repayments.
What is the cost of a mortgage release?
The calculation of this operation continues with the presence of mortgage release costs, if the loan guarantee is based on your property. Indeed, if the mortgage automatically ends one year after the last monthly payment on the loan, it is possible to withdraw it before this period, subject to paying the costs inherent in this operation.
They cover the fees of the notary, the property security contribution, the registration fees and the administrative costs, for a total ranging between 0.7 and 0.8% of the amount of the loan.
Amicably, this mortgage lifting results in the execution of an authentic deed at a notary, certified by both parties. If the bank refuses this release, the borrower can ask a court to rule: it will only succeed if the loan is already repaid or if the mortgage has already been automatically lifted.
Despite the desire, sometimes irrepressible to get rid of a mortgage, it is imperative to conduct a cost / benefit balance of an early repayment transaction. Do not hesitate to call on the expertise of a broker to help you assess the situation.