What happens if I pay 2 extra mortgage payments a year?

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Also, remember that you have at your disposal our variable mortgage comparator and our fixed mortgage comparator, where you can find all the offers on the market, compare their characteristics and start the process of contracting the one that most interests you.

If you have a mortgage (either variable or fixed) and you want to make an early repayment, your bank may charge you a compensation for early repayment, which is a percentage applied to the amount you repay early. However, not all banks do this. For example, ING’s variable mortgage does not charge anything for this concept (although its new fixed mortgage does).

Since the entry into force of the new mortgage law in June 2019, banks have new limitations on the application of fees for early repayment. If it is a variable mortgage, each entity must choose between one of these two formulas:

If you have decided to amortize your mortgage early and you are wondering whether it is better to reduce the installment or the term, it is important that you keep in mind that everything depends on your personal situation and your economic needs. However, if you have the opportunity to choose, reducing the term of your mortgage will allow you to save more than reducing the installment. We explain it with an example:

It is worth to advance mortgage

Author: Editorial staff 04 October 2021, 6:04Contents index Many mortgagors wonder when it is a good time to pay back the money to the bank in advance. Although a priori to reduce the debt always seems a good idea, the truth is that it is convenient to take into account several factors. For example, if with the amortization we want to reduce the monthly payments or the term of the loan, if the bank applies commission or the interest savings that we are going to get with the operation.

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When we talk about amortizing a mortgage, we are referring to the early repayment of the money we owe the bank. Normally, the money that the bank lends us is paid back month by month in installments. However, if at a given moment we get some extra money (from a new job, an inheritance, savings…), we can use it to advance the repayment of the loan. This is what we call mortgage amortization.

Consequently, taking into account the French method, the best time to amortize a mortgage is at the beginning, since the early amortization will allow us to pay less interest on the mortgage.

How to pay off a mortgage in less time

Think that, by paying off a mortgage early, you will always be saving money, since you will stop paying a part of the interest that your bank was going to charge you. However, the final amount you will save will depend on several factors.

Before deciding to amortize your mortgage by reducing the monthly payment or the term, you will have to study what the economic outlook of the market is and what your capacity is. If you choose to reduce the monthly payment, you will have a lower burden and will be able to make ends meet more easily. In addition, your saving capacity will increase, since the part of your salary that you spend on the loan payment will be reduced.

With this option, you will be able to have a larger amount of money per month for your expenses but, in the long run, you will not save much interest and you will still have a long-term debt. Therefore, it can be an interesting option for those people who have received extra money unexpectedly (inheritance, prize…) and, in spite of it, have problems to make ends meet.

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Mortgage amortization calculator

For example, if after 12 months the sum of the monthly mortgage payments amounts to 5,000 euros, the IRPF deduction would be 750 euros. The taxpayer would have to amortize another 4,040 euros to obtain the maximum tax award.

In short, the cheaper a loan is, the lower the incentive to amortize early. In iAhorro argue instead that “taking advantage of the negative Euribor can be a good option to reduce debt and better cope with the possible normalization of money in the future, when the mortgage rate rises again”. The financial portal points out, however, that “given the current situation of low interest rates, several factors must be taken into account when choosing the amortization option, in addition to the personal circumstances of each individual”.

What happens if I pay 2 extra mortgage payments a year?
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