Archive February 2019

How to Pay Off a Mortgage? Early Repayment of the Loan

Have you ever wondered how to pay off a mortgage?

Have you ever wondered how to pay off a mortgage?

This is a simpler operation than you might think, very useful for those borrowers who are in a position to anticipate part of the repayment. Usually, in fact, the opening of a loan provides for the consumer to accept an amortization plan that establishes the amount of the installments and their periodicity: the borrower must then follow this repayment plan for the entire duration of the loan.

However, it is possible that at some point in the amortization period the borrower has a new source of liquidity at his disposal or simply decides to get rid of part of his debt, repaying it in advance. This operation is, in fact, the early repayment of the loan, which can be total or partial: in the first case the borrower returns the entire residual amount of his loan, while in the case of partial repayment he agrees with the bank a sum amount to be repaid in one solution.

With the full advance repayment the loan is considered extinct, while with the partial repayment the main effects will be on the subsequent installments: in fact, as the amount to be repaid has decreased, the amount of the installments will also decrease. Thus structured, the early repayment transaction appears to be very convenient for the borrower, given that no interest is paid on the amount repaid. On the contrary, the bank is losing us, considering that it does not collect the potential interest on the installments still to be paid. For this reason, credit institutions have long demanded the payment of a penalty from those who paid off the loan in advance.

Today, thanks to the Bersani decree of 2007, this is no longer the case, given that this law provides that on all mortgages granted starting February 2, 2007, a penalty can no longer be imposed in the event of early repayment. However, many mortgages still open today were signed in the years prior to 2007. The law regulates this circumstance precisely, making a distinction between the loans granted after December 31, 2000 and those opened instead before that date. In this section, you will find all the information on the penalties still to be paid.

How to pay off a mortgage, then? Contact your bank and arrange with the staff at the counter for return arrangements, bearing in mind that you no longer have to pay any penalty.