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Housing Credit - When it is advantageous to pay in advance

What is housing credit?

Housing credit is a loan that financial institutions generally grant to purchase a property. To this end, a contract is drawn up between the financial institution and the party that intends to acquire the property in question.

How to pay off housing credit in advance

The housing loan can be paid in advance, before the deadline previously agreed in the contract. And why pay your mortgage in advance?

If the customer has the financial capacity to pay in advance, the interest to be paid on the loan will be lower than if they decide to wait until what is stipulated in the contract, which proves to be a strong advantage.

Refund can be partial or full.

Partial refund

Partial early repayment of housing credit means that part of the capital is paid, not all of it. By making this payment, you reduce the amount of principal you owe, which in turn reduces the interest payable on the loan – which means a reduction in your monthly payments. This is the benefit of paying your mortgage in advance.

Generally speaking, it is better to use your savings to prepay part of the loan than to invest them in a savings program. The interest rates you receive on your savings assets are typically lower than the interest rates you pay on the loans you take out.

Early partial repayment occurs on the installment due date, and the customer must notify the creditor at least seven business days in advance.

Full refund

Full early repayment of housing credit occurs when the full amount of the debt is paid before the deadline previously established in the contract.

Generally this type of advance payment occurs when the borrower intends to transfer the loan to another institution.

At any time during the contract period, the borrower can make a full early repayment of the home loan. However, it is imperative to notify the creditor at least ten business days in advance.

The institution where the loan is located must provide the institution to which the loan is transferred with all the data and elements necessary for the transfer, including the amount of capital owed and the duration of the initial contract, within ten working days – if the loan is transferred to another credit institution.

Cost of paying mortgage in advance

To make an advance mortgage payment, it is usually necessary to pay an amount to the credit institution.

If the contract has a variable interest rate, the commission must be equal to or less than 0.5% of the capital repaid. If the interest rate is fixed, the commission must be equal to or less than 2% of the capital repaid.

Attention: if the reason you want to pay your mortgage in advance includes unemployment, professional travel or death, you are exempt from paying the commission.

It is also important to mention that, in housing credit contracts with variable interest rates for the acquisition or construction of permanent housing, the customer is exempt from paying this commission until the end of 2023.

Read the full report here!

Source: Imovirtual


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