More and more homeowners are considering paying extra on the mortgage. The crisis, low savings rates and new mortgage rules make many people think about their mortgage. Certainly homeowners with a (partial) interest-only mortgage more often opt for an additional loan repayment. But sometimes you pay a fine for early repayment of the mortgage. What exactly is that and when can I repay my mortgage without penalty? Read everything about penalty-free repayments in the article below.
Why not pay off without penalty?
With a mortgage you enter into an obligation with the bank: the bank borrows your money to finance your house and you pay it back with interest according to an agreed repayment schedule. This repayment usually lasts 30 years. If you pay more than agreed, the bank will miss out on mortgage interest . The penalty interest is intended as partial compensation for the lost income.
Note: Re-lending your mortgage before the fixed-rate period has expired also means that you have to pay a penalty interest.
Fine-free mortgage repayment – Limit
Not every extra repayment automatically leads to a fine. Depending on the bank, you can repay 10 to 20 percent of the mortgage loan each year without penalty and there are banks that do not charge penalty interest at all. In addition to comparing interest rates when you take out a new mortgage, it is therefore wise to properly compare these types of conditions from different banks.
Tip! Repay your mortgage without penalty? Spread the extra repayment over several years, so that you can use the maximum penalty-free repayment several times.
Mortgage repayment without penalty – When not a fine?
In a number of situations you do not have to pay penalty interest if you take out the mortgage or pay off extra:
- If the fixed-rate period has expired
- If you have a variable-rate mortgage instead of a fixed interest rate
- If the mortgage interest at the same bank is higher at that time
- If you sell the property
Amount fine early repayment mortgage
The amount of the fine varies per situation, but there are some factors that partly determine how high the fine will be:
- The amount of the outstanding mortgage loan
- The remaining fixed-rate period
- The difference between your mortgage interest rate and the bank’s current interest rate
- The amount of the penalty-free repayment
- The amount of the total repayment
A bank adviser can tell you exactly which fine you have to pay.
If you are considering taking out a mortgage or making additional repayments, ask the bank what penalty interest you should pay. You can put this in addition to the benefit that you will gain if you pay off extra or take out your mortgage. In some situations it turns out not to be more beneficial to transfer or repay extra, in other situations it is.